“Bank War”

Chairmen of commercial banks in succession have declared “wartime management.”

The chairmen of Kookmin Bank (KB), Shinhan Bank, and Industrial Bank of Korea unanimously said at a December 1 monthly meeting, “The war between banks has begun. Let’s go for it!”

This simultaneous resolve has been prompted by fear of a crisis since the Korean subsidiary of the world’s number one bank Citibank, Citibank Korea Inc., opened on November 1, followed by the world’s number two bank HSBC’s recent plan to take over Korea First Bank.

KB Chairman Kang Jeong-won encouraged his employees, saying, “The war between banks is not fictitious but real, and we will certainly win this war by maximizing our potential.” “The budget plans submitted by respective divisions all suggest increased spending and lowered profit target, which cannot be accepted given the tight banking management environment these days,” he said, showing his commitment for belt-tightening management.

He also stressed, “The customer-unfriendly ‘bank of aristocrats,’ whose headquarters rule branches, cannot survive the competition. The head office must respect the local branches in order to double its sales capability.”

Chairman of Shinhan Bank Shin Sang-hoon said on this day, “The big-scale war of life and death against world-renowned banks such as Citibank and HSBC is imminent. We should respond to the crisis beforehand to become the leading bank.”

Chairman Shin called for thorough asset quality management and aggressive sales by saying, “If the performance in December, the most important month of the year, falls far short of that of the year’s average, it will affect personnel records.”

Chairman Kang created some tension by making unusually strong remarks such as, “There’s a lack of willpower to win the war,” “It won’t work this way,” and “I’ll take the initiative,” and Chairman Shin has also reportedly said, “I won’t accept moral hazard,” “We’ll see at the performance evaluation gathering.”

Meanwhile, the chairman of Industrial Bank of Korea Kang Kwon-seok said on the day’s monthly meeting, “The domestic banking sector is facing ‘the second Big Bang,’ and we cannot and will not be complacent like the state-run banks in the past.” “Mid-to-long term survival depends on the outcome of next year’s competition, and we should make all-out efforts in maintaining the leading role to support major small and medium-sized companies,” he emphasized.

Cheol-Yong Lee Seung-Jin Kim lcy@donga.com sarafina@donga.com