Gov't plan to relocate state-run financial institutions to regional areas faces backlash

Headquarters of Korea Development Bank in Seoul / Courtesy of the KDB

Major state-run financial institutions, including the Korea Development Bank (KDB), are intensifying their opposition to a possible government plan to relocate their headquarters out of Seoul, industry officials said Tuesday.

Unions at three major policy lenders, the KDB, the Export-Import Bank of Korea and the Industrial Bank of Korea, have planned a joint rally against the relocation, while unions at the Korea Deposit Insurance Corp. (KDIC) and Korea Trade Insurance Corp. (K-SURE) have also voiced opposition through policy forums and statements.

While the government has yet to finalize the list of institutions to be relocated, local governments such as Busan are stepping up efforts to attract them to their regions.

The unions of the three state-run banks argue, however, that relocating policy banks out of Seoul ignores the nature of financial markets and could weaken policy financing capabilities and national competitiveness by splitting up key financial institutions.

“Even concentrating all financial capabilities in one city is not enough to compete with global financial hubs,” the unions said in a joint statement. “Mechanically dispersing specialized policy finance institutions could undermine the funding ecosystem for high-tech industries and small businesses.”

They also claimed that the previous round of public institution relocations had limited success in dispersing the population, with only 10 percent of the population moving out of the capital region.

Other agencies that could be included in the relocation plan have voiced similar concerns.

The union of the KDIC, which is reportedly being considered for relocation to Sejong, held a policy forum on the issue and emphasized the importance of close access to financial regulators and private financial institutions given its role in deposit insurance and financial stability.

"We have sought legal advice on whether a relocation could violate labor laws or the Constitution, as well as on legal issues concerning the relationship between individual employees and their employer," said Kim Young-heon, head of the KDIC union.

The K-SURE union also said its operations depend on close coordination with commercial banks and exporters, making physical proximity to them essential for efficient decision-making.

On the other hand, local governments are stepping up their competition to attract those institutions. Busan recently launched a task force focused on attracting the three state-run banks and K-SURE as part of its efforts to strengthen the city's position as a financial hub.

The government has yet to announce specific targets or selection criteria for the second phase of the relocation plan.

Government officials said a detailed road map could be unveiled as early as this month.