Government leans on banks to hire more

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Government leans on banks to hire more

Major banks are being pushed by the government to increase hiring as the Moon Jae-in administration scrambles to improve economic indicators.

Banks are an easy target as they are profitable and are dependent on the government for regulatory approvals.


The Financial Services Commission (FSC), the country’s top financial regulator, went to great lengths earlier this month to announce a new index measuring the “contribution” major banks make toward the creation of jobs.

The index, the FSC says, will not only factor in the direct contribution - that is, banks hiring - but will also factor in indirect contributions, hiring that results from funding that banks provide to the economy.

“Financial company jobs are considered some of the most sought-after, with decent working conditions and high salaries,” said the regulator in a statement.

“As the government pulls all resources to build an economy driven by job creation, the finance sector needs to play a bigger role,” the FSC said.

The measure will look into the employment situation at 14 banks, including Shinhan, KB Kookmin, Woori, KEB Hana and NongHyup, and the first result - which is based on last year’s performance - will come out in August.

The announcement of measures that only apply to the banking sector led to the voicing of some concern, as many banks are on track to reduce the number of bank tellers with the growing use of mobile and online services.

“It is true that we feel some burden because of the decision,” said a source at one of the 14 banks.

The number of bank employees has been steadily declining, with the four largest banks - Shinhan, KB, Woori and KEB Hana - reducing head count by more than 6,000 over the past two years, according to the Financial Supervisory Service (FSS).

The downturn is linked to the widespread use of digital banking that negates the need to visit brick-and-mortar branches.

Despite the trend, banks have been targeted since they still fare better in terms of earnings compared with ailing industries.

The combined net profit of Korean banks grew 23.4 percent to 13.8 trillion won ($12 billion) last year, backed by strong interest margins.

Three years ago, the net generated by the banks was a quarter of what it was in 2018. It hit a six-year high of 11 trillion won in 2017.

This year’s annual net profit is expected to come in at around 10 trillion won, since 3.8 trillion won was made in the first quarter alone.

The government’s strong control over the regulation of the sector makes the banks generally amenable to cooperation. The FSC and FSS oversee and make determinations about a wide range of issues directly affecting the business of banks, including loan screening guidelines, the approval of new business lines and financial soundness.

“Since the government’s policy direction is focused on job creation, we make efforts to go hand in hand with the agenda,” said another source in the banking sector who spoke on the condition of anonymity.

Hiring is not the only demand; the government also hopes that the banks will help in boosting exports, investment and funding for small and medium enterprises.

Finance Minister Hong Nam-ki met with the heads of commercial banks to convey the new priorities.

“Korea faces growing downside risks,” Hong told the reporters after the meeting, “[I requested] that banks play an active role in bolstering investment and exports, and financing marginalized people.”

In response to the call, Shinhan Bank and Woori Bank recently unveiled their plan to create funds for tech-focused small- and medium-sized companies.

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