Banks play down plans to cooperate with NorthSouth Korean banks are taking a step back from efforts to cooperate with North Korea after phone calls in September from the U.S. Treasury Department caused panic in the financial sector.
Although the Treasury Department has maintained that it only made routine calls to local banks, the move appears to have dampened efforts to pursue preparations to enter North Korea in fear of potentially violating international sanctions.
Improving inter-Korean relations earlier this year led a number of banks to lay groundwork for possible projects with the North. After the recent scrutiny, the efforts seem to have stalled or come to a complete stop.
In May this year, Woori Bank established the inter-Korean financial and economic cooperation task force. According to an Woori Bank official, “The organization would internally consider possible projects to pursue when inter-Korean economic cooperation restarts.”
The task force, however, still exists in name only despite operating for three months. “We could meet again if a new issue arises, but we’re not at such a situation right now and there are currently no plans,” said the official.
KB Kookmin Bank made similar efforts by posting job openings for North Korea experts in July. The bank planned to hire master’s or doctoral degree graduates to research inter-Korean economic cooperation and North Korea’s financial infrastructure. The company has yet to hire a single person.
“We are internally considering whether to continue recruitment,” said an official at the bank.
The current mood is a stark contrast from earlier this year, when local banks promoted their efforts for inter-Korean cooperation and organized specialized North Korea finance-related teams amid easing relations.
But such efforts were not completely voluntary, according to some officials in the industry.
“In case of eased North Korea sanctions, preparations were made in order to immediately enter [North Korea], but some banks took part as a mere formality to appease the government,” said an official at a bank who requested anonymity.
Banks that were eager to follow the South Korean government’s efforts to promote inter-Korean cooperation are now wary of the U.S. government. Plans to operate branches in North Korea are at a standstill.
“The Kaesong branch has been closed since the Kaesong Industrial Complex shut down,” said an official from Woori Bank who once oversaw the bank’s Kaesong Industrial Complex branch. The Kaesong Industrial Complex, a joint inter-Korean project that used North Korean labor and South Korean capital, closed when relations worsened in 2016. “The temporary Kaesong branch on the first floor of headquarters operates as a formality.”
Nonghyup Bank, which considered reopening its branch in North Korea’s tourist complex in Mount Kumgang, as well as offering a new financial product that donated a portion of its profits to a unification fund, remained silent about its plans, explaining that they were simply ideas.
Banks that earlier created inter-Korean cooperation units are now calling them study groups or internal gatherings.
A Shinhan Bank official who formed the inter-Korean economic cooperation lab in July explained, “It has two permanent members who study together.”
The Industrial Bank of Korea, which created a committee to support inter-Korean economic cooperation, said the group only met twice.
The Korea Development Bank, which drew attention as its CEO Lee Dong-gull travelled with president Moon Jae-in to Pyongyang in September, said it had plans for economic cooperation with North Korea but is not carrying them out due to sanctions.
Officials in the banking industry expressed frustration at the current situation.
“Until recently, banks were competing to lead inter-Korean economic cooperation, but seeing now that they are denying everything and laying low, this situation is laughable,” said an official from a bank.
BY KIM TAE-YUN, JEONG YONG-HWAN [firstname.lastname@example.org]