Korean banks retain NK branch licenses in case of thaw in relations

A North Korean employee carries out banking services at Woori Bank's Gaeseong Industrial Complex branch in North Korea in this December 2013 photo. Newsis

Despite strained inter-Korean relations, South Korean banks continue to hold licenses, thereby allowing them, one day, to establish branches in North Korea, if a thawing of ties occurs at some point.

According to sources in the banking industry, Monday, Woori Bank has been operating a temporary branch for the Gaeseong Industrial Complex in the basement of its headquarters in Seoul for seven years and eight months. At present, a deputy director-level employee serves as its acting branch manager.

It is known that those who once ran businesses in the Gaeseong Industrial Complex occasionally visit the branch. Some have yet to close their accounts, holding onto hope that business will resume someday.

In September 2004, Woori Bank was selected as a resident bank for the Gaeseong Industrial Complex. The bank offered specialized loan services to small and medium-sized enterprises within the complex, using building and land-use rights as collateral. The bank served as a tangible symbol of economic cooperation between the two Koreas.

However, following North Korea's fourth nuclear test in February 2016, the complex was shut down, leading to the bank's closure as well.

"It's challenging to regain a license once it's relinquished. We currently have no plans to close the temporary branch," a Woori Bank official said.

Unlike Woori Bank, NH NongHyup Bank does not operate a temporary branch at this moment. However, it holds the right to establish a branch at Mount Geumgang, a resort area on the North Korean side of the eastern region of the inter-Korean border.

In November 2005, Hyundai Asan, which oversaw the tourism program in the area, selected NH as its primary business partner. Subsequently, in May 2006, the Ministry of Unification approved their partnership, granting it the license.

The bank's branch at Mount Geumgang catered to tourists by offering dollar exchanges, operating 12 hours a day without any holidays. However, the operation ground to a halt and two of its staff were recalled after a tragic accident in July 2008 in which North Korean soldiers fatally shot a South Korean tourist who had allegedly wandered out of bounds.

In an effort to bolster internal controls last December, the bank's global business department reduced its operating funds limit to just $1.

"Considering the potential resumption of tourism to Mount Geumgang in the future, we are retaining the license," an NH NongHyup Bank official said.