Citigroup set to pay $1.5 bil. to exit Korea

Citibank Korea's headquarters in Seoul. Yonhap

By Lee Min-hyung

Citigroup is considering spending up to $1.5 billion (1.76 trillion won) to exit from the consumer banking business in Korea with most of the money covering severance payments.

After announcing plans for the phased shutdown of its retail banking operation here, Citibank Korea is accepting applications for voluntary retirement from about 3,500 employees until Nov. 10.

Citibank Korea offered to pay the highest level of retirement allowance seen so far in the domestic industry, with the lender planning to pay as much as 700 million won to each applicant.

A spokesman at the lender declined to comment on how many employees have so far applied for voluntary retirement. But industry insiders expect more than half of the bank's employees have done so.

Starting late last month when Citibank Korea decided to shut down its retail banking operation in phases here, unionized workers have stepped up criticism of the plan and asked management to guarantee job security. The union has accused Citibank of the "careless" shutdown of the retail banking unit.

But as the Korean subsidiary failed to find a potential buyer to take over the consumer banking business, chances are growing that most of the employees will end up losing their jobs over the next few months.

Citibank Korea will submit specific customer protection plans to the nation's financial watchdog soon after sorting out the retirement application process.

"We are still preparing (before submitting the document to the Financial Supervisory Services -- FSS)," Citibank Korea CEO Yoo Myung-soon said Tuesday before attending a meeting with FSS Governor Jeong Eun-bo.

In Korea, a growing number of employees from commercial banks are leaving their jobs with voluntary retirement packages amid a rapid paradigm shift triggered by the rise of digital banking.

Standard Chartered (SC) Bank Korea received voluntary retirement applications from around 500 employees last month. This was the largest figure since 2015 when it accepted retirement applications from about 960 workers.

More than 2,000 employees from SC and other Korean commercial lenders ― such as KB, Shinhan and Woori ― have retired this year alone.

The combined figure from all the banks throughout this year will soar to a record high after Citibank Korea finishes accepting voluntary retirement applications.

Financial industry officials expect more bank employees to seek voluntary retirement for at least the next few years, as digital banking is gradually replacing traditional jobs at a rapid pace.

"Almost all the banking groups here have generated record earnings this year on interest rate hikes, so they have been able to offer an attractive set of retirement benefits for their employees," a bank industry source said.

"The swift transition into digital banking ― as is shown by mass closures of bank sales branch offices nationwide ― is also another factor that pushes employees to leave banks at a relatively younger age than before and find jobs in other emerging areas ― such as internet-only banks," the source added.

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