이 기사는 2021년 11월 01일 07:42 thebell 에 표출된 기사입니다.

South Korea’s Financial Services Commission (FSC) held a meeting on Wednesday to approve an order forcing Citibank Korea to take necessary measures to protect its clients before closing down its retail banking operations in the country.

Industry insiders pointed out that the authority's intervention was too late and it is repeating a similar mistake after it missed an opportunity to close loopholes of the banking law when HSBC closed its retail banking in South Korea a few years ago.

The FSC said on Wednesday that Citibank Korea‘s withdrawal of consumer banking in phases is not regarded as a "shutdown of banking business", which falls under the FSC‘s approval according to the current banking law.

The FSC and Financial Supervisory Service (FSS) have reviewed whether Citibank Korea’s decision is subject to the authorities’ approval according to the Article 55-1 of the country's banking act. The lender's consumer banking division accounts for 30.4% of its total assets.

Legal experts widely viewed that the lender will need the regulator’s authorization if it transfers part of its business, but closing part of its business will not require approval from the regulator. They used the HSBC’s withdrawal from Korea as a reference.

In 2013, HSBC’s Korean unit closed 10 out of 11 branches. At that time, HSBC received approval for closure of its branches, but did not receive approval for closure of its retail banking business.

This means that the FSC cannot apply the current banking act to put a brake on Citibank Korea's plan to shut down the consumer banking operations.

However, the authorities found a solution in the Financial Consumer Protection Act, which took effect on September 25. According to the law, the FSC can order financial product sellers to take necessary measures, such as correction or suspension, in order to protect the rights and interests of financial consumers and ensure a sound transaction order.

"Citibank Korea does not need regulatory approval to shut down its consumer banking operations under the banking act, so we searched for appropriate ordinance,” a financial watchdog official said. “We can protect consumers based on the Financial Consumer Protection Act, and actions can be taken if orders are violated.”

Criticism is arising over the financial authorities’ belated measures. Analysts said the financial authorities should have amended the banking act earlier after HSBC Korea’s retail banking shutdown.

As the domestic banking industry has become less attractive due to tighter regulations, there is a possibility that additional cases like HSBC and Citibank Korea may occur. Some market experts said that it is necessary to have a look at the entire banking act. (Reporting by Jang-jun Lee)