Tiếng ViệtJapan’s Yamaguchi Bank plans to shut down its Busan operation after 38 years of service.
According to industry sources, the Financial Services Commission (FSC) is expected to decide this month whether to approve Yamaguchi Bank’s application to close its Busan branch. The bank submitted its application to the FSC on March 22, and the FSC collected relevant opinions from May 3 to 17.
Since Yamaguchi Bank has only been operating its Korean branch in Busan, its closure will result in the bank’s total withdrawal from the country.
Yamaguchi Bank is a regional bank based in Japan’s Yamaguchi Prefecture. Establishing its Busan branch in 1986, the bank has been providing services to corporations that are involved in the export and import of marine products in Busan and South Gyeongsang Province for 38 years.
However, the bank has reportedly been experiencing deficits for nine years, fueled by a slump in loan services that it provided to small and medium-sized corporations, plus an increase in labor costs. The strong influence of domestic regional banks is also known to have affected its ability to compete in the region. Since last year, it has been repaying loans and making its employees undergo a retirement process to close its operations here.
Market insiders believe the impact of the bank’s withdrawal will be minimal, as the assets managed by the bank are small compared to other foreign branches. The bank’s total assets stood at around 91.9 billion won ($67.3 million) as of the first quarter of last year, according to data filed with the Korea Federation of Banks.
In recent years, there have been a series of withdrawals and downsizing of business operations by foreign banks in Korea due to worsening profitability and enhanced regulations.
In 2022, Northern Trust, the world’s third-largest trust bank, decided to shut down its Seoul branch. In 2021, BNY Mellon, one of the oldest U.S. banks, halted its corporate trust operations in Korea. During the same year, Citibank Korea announced its plans to shut down its retail banking business in phases.
The number of foreign bank branches in Korea was 48 in June 2016 and has since been on a downward trend. Following Yamaguchi Bank’s closure, the figure will become 39.
Yamaguchi Bank’s withdrawal is especially bitter for Busan which aims to become a global financial hub. With this closure, all 166 foreign financial institutions operating Korean headquarters will be located exclusively in Seoul and the surrounding metropolitan area.
“The reason why global financial institutions have their headquarters in Singapore, despite its smaller real economy compared to ours, is that the country has established and implemented laws and systems that meet global standards,” said Lee Byung-yoon, a senior research fellow at Korea Institute of Finance.
“In Korea, foreign companies are burdened by the frequent sanctions and criminal penalties imposed on financial CEOs. The rigid labor market, which makes hiring and firing difficult, also needs improvement.”
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