[Song Seungseop's Financial Light] Why Are Financial Public Institutions Concentrated in Provinces?

4 of 8 Financial Public Institutions Located in Busan and Daegu
'Public Institution Relocation' Started Under Roh Moo-hyun Government in 2003
2022 Ruling and Opposition Presidential Candidates Also Say "Public Institutions Must Move"
Industrial Bank Opposes, Saying "Relocation to Provinces Is Regression, Not Progress"

Finance is difficult. It is entangled with puzzling terms and complex backstories. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and to consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial issue each week and explains it in very simple terms. Even those who know nothing about finance can immediately understand these 'light' stories, lighting a bright 'fire' of financial insight.

A financial public institution under the jurisdiction of the Financial Services Commission.

[Asia Economy Reporter Song Seung-seop] There is an indispensable entity for the development and stability of the financial industry and the protection of financial consumers. That is financial public institutions. They protect depositors from financial accidents, manage public assets, and handle microfinance tasks. However, many financial public institutions are located outside of Seoul, in provincial areas. Why are financial public institutions located in the provinces?

There are eight major public institutions under the Financial Services Commission. They are the Korea Inclusive Finance Agency, Korea Credit Guarantee Fund, Korea Deposit Insurance Corporation, Industrial Bank of Korea (IBK), Korea Development Bank, Korea Securities Depository, Korea Asset Management Corporation (KAMCO), and Korea Housing Finance Corporation. Specifically, the Korea Inclusive Finance Agency, Korea Credit Guarantee Fund, Korea Deposit Insurance Corporation, KAMCO, and Korea Housing Finance Corporation are 'quasi-governmental institutions,' while IBK, Korea Development Bank, and Korea Securities Depository are 'other public institutions.'

Among the eight financial public institutions, four are located in provincial areas. The Korea Securities Depository, KAMCO, and Korea Housing Finance Corporation are in Busan Metropolitan City. The Korea Credit Guarantee Fund is in Daegu Metropolitan City. The remaining four institutions are in Seoul.

A bird's-eye view of Busan International Financial Center (BIFC).

These institutions were not originally established in the provinces. They were initially located in Seoul. Starting in 2014, the Korea Securities Depository moved to the Busan International Finance Center (BIFC), followed by the Korea Housing Finance Corporation and KAMCO. The Korea Credit Guarantee Fund was also located in Gongdeok-dong, Seoul, in 1985 but relocated to Daegu in 2014, about 30 years later. Although not under the Financial Services Commission, the Korea Housing Guarantee also moved to Busan at that time.

The relocation of public institutions is closely related to politics. The Roh Moo-hyun administration, established in 2003, began promoting 'Innovation Cities' for balanced national development. The goal was to develop regional hub cities to alleviate the concentration in the Seoul metropolitan area and improve local economies. One of the key success factors for Innovation Cities was the relocation of public institutions from Seoul. It was believed that moving public institutions employing hundreds or thousands of people to Innovation Cities would revitalize the local economy.

In June 2003, the 'Policy for the Relocation of Public Institutions for Balanced National Development' was announced, and in April 2004, the 'Special Act on Balanced National Development' provided the legal basis for relocating public institutions to the provinces. As a result, out of 345 public institutions in the metropolitan area, 175 were designated for relocation. The first move to Jeju Innovation City began in December 2012 with the National Land and Transport Human Resources Development Institute, followed by other public institutions moving to the provinces. The reason why many financial public institutions moved to Busan was because Busan was selected as a financial city in 2009.

Heated 'Financial Public Institutions' Relocation Pledge... Will KDB Move to Busan?

Lee Jae-myung, the Democratic Party candidate (left), and Yoon Seok-youl, the People Power Party candidate [Image source=Yonhap News]

Discussions about relocating financial public institutions have flared up again ahead of the presidential election. Presidential candidates from both major parties have pledged to relocate additional financial public institutions. Lee Jae-myung, the Democratic Party candidate, said during a visit to Daejeon last November, "If I become president, I will try to relocate all more than 200 public enterprises and institutions remaining in the metropolitan area to the provinces." The relocation targets include the Korea Development Bank and IBK.

Yoon Seok-youl, the People Power Party candidate, specifically pledged to relocate the Korea Development Bank to Busan. At the Busan Election Committee's Victory Rally on the 15th of last month, Yoon said, "For Busan to rise as the world's top maritime city and an advanced city, financial resources must support it," adding, "This cannot be achieved without the financial industry. Therefore, I will relocate KDB Korea Development Bank to Busan." Yoon believes that relocating KDB to Busan will have a significant development effect.

Lee Dong-geol, President of Korea Development Bank [Photo by Yonhap News]

As the possibility of KDB's relocation grows, voices of opposition and concern are also increasing. Industrial Bank of Korea President Lee Dong-geol publicly criticized the idea, saying, "The political circles do not understand how industry, finance, and companies operate." At a press conference, he argued, "Relocating KDB to the provinces is regression, not progress, and goes against financial development," adding, "Based on my five years of experience as KDB president, it is more efficient for KDB to remain in Seoul, the financial and economic capital, to support balanced development nationwide."

Among experts, there are many criticisms that relocating financial public institutions causes significant negative effects. The Financial Services Commission, the supervising ministry, is located in Seoul, and many private financial companies are also based there, leading to increased inefficiency in operations. In the case of KDB, the Industrial Bank of Korea Act, which stipulates that the head office must be in Seoul, would also need to be amended.