Major commercial banks are scaling back payrolls and closing down uncompetitive branches in the wake of weakening profits brought by low interest rates.
While the industry’s full-scale restructuring is considered an inevitable measure to improve its manpower structure, concerns have also been raised over the possibility that it may reduce the quality of the nation’s financial services.
KB Kookmin Bank led spearheaded the move by accepting the voluntary redundancies of 1,121 employees in June.
“Voluntary redundancy is the key solution to stabilize employment and to extend the retirement age,” said Yoon Jong-kyoo, chairman of the KB Financial Group and president of the bank.
He claimed that the downsizing of the bank was necessary to make room for the upcoming launch of its insurance branch. The banking group recently launch KB Insurance, a rebranding of LIG Insurance.
To those who wished to stay in the job, the bank will apply a peak wage system, which guarantees their employment status until the legal retirement age at the cost of reducing their pay gradually after a certain point.
Woori Bank, which is still up for sale, accepted hundreds of applications for voluntary redundancy lately.
“We had less need (than others) to downsize as we have already detached several of our subsidiaries last year,” said a spokesperson of the government-owned bank.
Last year, Woori Financial Group was broken up after it sold off its brokerage houses and provincial banks, leaving only the main Woori Bank in action.
Hana Bank and Korea Exchange Bank, two banking units of Hana Financial Group, are expected to implement a mass restructuring once they complete their merger.
The key goal of the banks is to turn their so-called “amphora-type” manpower structure into a pyramid structure ― reducing the numbers of mid-senior executives and expanding the number of new employees.
According to the data submitted by the Financial Services Commission to the National Assembly last month, 3 out of 10 regular employees at the nation’s top seven banks were at management level.
The corresponding ratio was the highest in Korea Exchange Bank, with 61.8 percent out of the total 4,984 staff.
But there are also concerns that the mass downsizing may not directly lead to an increase in profits and that it may eventually bring down the banks’ levels of customer service.
A recent report by Woori Financial Research Institute claimed that domestic banks have so far failed to achieve a qualitative restructuring.
“After sending out the baby boomers generation, banks should continuously keep up the level of their financial services by recruiting new employees,” the report said.
It also advised that banks should be more careful about reducing the number of branches, citing the case of the Bank of America, which reduced costs through an unprecedented restructuring but experienced a fall in profits in the long term.
“Despite the rise of mobile banking, the banks are still significantly reliant on their brick-and-mortar offices and face-to-face business sales,” the report said, suggesting that banks should reallocate their surplus manpower into new business opportunities, instead of sending them away.
By Bae Hyun-jung
(
tellme@heraldcorp.com)
