[EDITORIALS]A prod for Korea’s banksRegarding Korea’s competitiveness, it is a good news that Citigroup, the world’s largest financial services group, announced that it will acquire KorAm Bank.
The foreign companies that have acquired domestic banks until now are all private equity funds, including Carlyle, which has agreed to sell its controlling stake in KorAm Bank to Citigroup, and Newbridge Capital and Lone Star, which took over Korea First Bank and Korea Exchange Bank, respectively. Those funds are seeking profits by buying troubled financial services companies and selling them after reforming their business.
Unlike them, Citigroup has taken over KorAm Bank for the group’s business in Korea. It indicates that Citigroup has an optimistic view of the outlook for Korea’s financial industry. Citigroup’s decision to take over a domestic bank followed Prudential Financial’s decision to acquire Hyundai Investment & Securities last year.
Seeing such moves, other foreign financial services companies are likely to actively consider investment in Korea. It has expanded Korea’s chances of developing into a financial hub of Northeast Asia.
Some argue that foreign capital was preferred to domestic capital in the bids for domestic banks and it is discrimination against domestic capital. But the active takeover of domestic banks by foreign capital resulted inevitably from the structure of the domestic financial industry. Citigroup has decided to acquire KorAm Bank because it judged that it could win the domestic banking market with domestic banks currently failing to fully function.
Accordingly, domestic banks should focus on improving their basic competitiveness. They should be loyal to the basic aims of the financial services business ― satisfying consumers, reinforcing safety and improving profitability.
The financial watchdog authorities should also change. Citigroup’s operations, using advanced financial services methods, might collide with the financial watchdog agency’s old practices, because Korea’s industry is in a time of transition to the global standard.
The financial watchdog should reform the standards of its supervision to reduce unnecessary collisions.
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