Korea Citi Bank Ultimately Chooses 'Cheongsan', Conflict Intensifies Amid Strong Union Opposition (Comprehensive Report 2)

Korea Citibank Faces Liquidation After Retail Banking Sale Falls Through
Bank Promises "Measures to Minimize Customer Inconvenience and Guarantee Employment Stability"
Union Strongly Opposes Gradual Closure, Warns of Physical Protests
New Product Subscriptions Halted; Existing Customer Contracts Remain Valid

[Asia Economy Reporter Song Seung-seop] Korea Citibank is finally taking steps toward the phased discontinuation (liquidation) of its consumer finance business. This decision comes six months after Citigroup announced its exit strategy plan for 13 countries, including Korea. However, there are still many hurdles to overcome before the actual withdrawal, such as negotiations with the labor union and approval procedures from financial authorities. In particular, as the union opposes the liquidation and insists on resale if conditions improve, conflicts are expected to intensify going forward.

On the 25th, Korea Citibank announced that it would proceed with the phased discontinuation (liquidation) of its domestic consumer finance business division. This comes 17 years after entering the Korean market. Liquidation is a process of withdrawing without selling the existing business to another corporation. By exiting the retail finance market that handles deposit and loan services for individual consumers rather than corporations, Korea Citibank will focus on corporate finance going forward.

Korea Citibank’s consumer finance withdrawal strategy was formalized last April. Since then, through three board meetings, it has weighed three options: full sale, partial sale, and phased discontinuation. The sale process accelerated as multiple financial companies expressed interest in acquisition. The partial sale method, which involved separating and selling high-quality business units such as credit cards or wealth management (WM), attracted attention but ultimately fell through.

This decision is expected to inevitably lead to clashes between Korea Citibank and the labor union. The union opposes both partial sale and phased discontinuation. If a full sale is difficult, they argue that instead of rushing the withdrawal, the bank should take several years to prepare and then pursue resale. If this proposal is not accepted, the union may escalate to full-scale confrontation, including large-scale strikes. The right to strike was already secured in June through a vote with a 99.1% approval rate.

Labor-Management Conflict, Financial Authority Approval... Numerous Challenges Before Withdrawal

Negotiations on the voluntary retirement plan, which were ongoing with the union, are also likely to be suspended. At the end of last month, Korea Citibank management proposed a voluntary retirement plan offering up to 700 million KRW in severance pay to employees. Although considered generous, the union insisted that the company’s sale policy must be decided first.

Ultimately, the ‘high labor costs’ and the resulting ‘employment succession’ issues, raised since the early stages of the sale, have become the biggest obstacles. The union estimates that there are about 2,500 consumer finance employees at Korea Citibank. As of the end of last year, the average length of service was 18.2 years, and the average annual salary was 112 million KRW, higher than other commercial banks. Most prospective acquiring financial companies reportedly expressed reluctance toward full sale and employment succession due to cost concerns.

The approval from financial authorities is also a concern. The Financial Services Commission (FSC) announced that it has issued a prior notice of corrective measures under the Financial Consumer Protection Act. This is because there is a high likelihood of consumer inconvenience and reduction of consumer rights. The FSC stated, "We have ordered the bank to thoroughly prepare and implement plans to protect consumer rights and maintain transaction order during the phased discontinuation of the retail finance division, and to submit these plans to the Financial Supervisory Service (FSS) before starting the phased discontinuation process."

At a recent National Assembly Financial Services Committee audit, FSC Chairman Ko Seung-beom said, "We are reviewing whether the phased discontinuation of Korea Citibank’s retail finance business requires approval under the Banking Act," adding, "Regardless of whether it requires approval, we will closely examine the matter from the perspectives of consumer protection and financial order maintenance." If the authorities do not grant approval, the withdrawal process will inevitably face setbacks. With the presidential election approaching, large-scale strikes and unemployment could invite political intervention.

The Korea Citibank labor union immediately issued a statement opposing the phased discontinuation. The union stated, "The management chose the easiest method of hasty liquidation (phased discontinuation) instead of actively persuading Citigroup headquarters to maintain the consumer finance business in Korea, thereby protecting over 2 million customers and stabilizing employment for 2,500 consumer finance employees." They also warned that they would use all means and methods to block this and hinted at collective action.

The union’s alternative is for the company to withdraw the liquidation decision and, like the 2016 Colombia Citibank case, postpone the sale until conditions in the financial industry improve, then pursue resale.

Furthermore, the union warned the financial authorities, "If the authorities approve Korea Citibank’s liquidation (phased discontinuation), they will be neglecting the financial consumer damage and the large-scale unemployment of employees."

All Product Subscriptions and Services Suspended... Citibank Side Says "Minimizing Consumer Damage"

Korea Citibank plans to minimize consumer damage and ensure no inconvenience in usage due to the withdrawal from retail finance. To this end, it will comply with new procedures and closely coordinate with financial supervisory authorities to reduce customer inconvenience as much as possible while preparing consumer protection measures to prevent damage.

Consumers will continue to receive the same services for their existing deposits, loans, credit cards, investment products, and trusts until contract maturity or termination. Branches, mobile and internet banking, call centers, and ATMs will also operate as usual until further notice. For loan extensions, detailed information including extension criteria will be separately provided to consumers.

However, new subscriptions to all consumer finance products and services will be suspended from a date to be announced later. Measures to encourage consumers to transfer their assets will also be implemented. In particular, from November 1, early repayment fees will be fully waived when transferring loans to other banks or repaying loans early.

President Yoo Myung-soon said, "We will strictly comply with relevant laws and supervisory authorities’ measures during the phased discontinuation of the consumer finance business division," adding, "We will also implement employee protection and consumer protection measures, including a voluntary retirement program."