Citibank Korea confirms shutdown of retail banking operations

Employees of Citibank Korea sit behind a counter at the company's head office in Seoul in this file photo taken on April 19. Yonhap

Citibank accepts voluntary retirement amid phased shutdown

By Lee Min-hyung

Citibank Korea CEO Yoo Myung-soon

Citibank Korea decided Monday to carry out a phased shutdown of its consumer banking operations after failing to find a buyer for the division.

Until recently, the Korean subsidiary of Citigroup left open the possibility of selling off the division to a potential buyer, but its board confirmed Friday the decision to close down the consumer banking operations here in phases.

“We have held enough discussions on a number of proposals from potential buyers, but decided to conduct a phased shutdown of our retail banking business due to realistic constraints,” the company said in a statement.

Citibank Korea said it would accept voluntary retirement applications from its employees and pledged to guarantee jobs for those who want to continue working at the lender by shifting them to other divisions.

“We are going to thoroughly abide by relevant laws and regulations from watchdogs while carrying out the phased shutdown and will run a set of programs to protect employees and customers,” Citibank Korea CEO Yoo Myung-soon said.

The decision came about six months after Citigroup announced its strategy of exiting the consumer banking markets in 13 countries including Korea.

Citibank Korea placed top priority on ensuring job security for its employees and sought to find a potential buyer who can guarantee employment succession after acquiring the division.

But such efforts proved to be futile and sparked concerns that around 2,500 employees at the lender's retail banking division may face layoffs.

Fierce protest set to ensue from union

The ongoing conflict between Citibank's management and union is expected to escalate further following the latest decision. Citibank's union has insisted that the lender should push to sell the retail banking division “as a whole” to a potential investor amid concerns over job security.

The union urged financial authorities to disapprove the decision by management, saying that mass layoffs will ensue if the retail banking division is sold off without a guarantee of job security.

“According to a local banking act, the Financial Services Commission (FSC) holds authority over whether to grant approval for the phased shutdown of Citibank Korea's consumer banking,” the union said. “We demand the watchdog disallow the Citibank Korea decision by carrying out thorough and strict screening.”

Even if Citibank Korea continues to reiterate its willingness to guarantee job security for its employees “as much as possible,” the union is showing no signs of coming to terms with management.

Earlier, Citibank Korea offered to provide as much as 700 million won ($599,000) in severance pay, but the labor union did not accept the offer. Given the hardline stance of the union, it appears unlikely that both sides will be able to settle the issue in the near future.

On Monday, the FSC ordered Citibank Korea to submit specific plans on how it will protect the rights and interests of consumers before taking steps for the phased shutdown.

“It is highly probable that consumers will have to endure inconvenience if the lender pushes on with the step, so we ordered the lender to submit plans to prevent such problems,” an official from the watchdog said.

The lender said new customers will not be able to sign up for any of the existing financial services offered by Citibank's retail banking division.

Citibank Korea's initial plan was to sell off the retail banking division as a whole, but changed the strategy by leaving open the possibility of divisional sales of the business ― such as wealth management, credit cards and loans ― to multiple investors. The phased shutdown was the last option the lender planned to use if it failed to find buyers.

Chances are Citibank will follow in the footsteps of HSBC Korea which closed down all of its consumer banking branch offices except for one in Seoul in 2013 after failing to find a buyer. Back then, more than 90 percent of its employees here had to leave the company after accepting voluntary retirement packages.