As the government steps up discussions on a second phase of relocating public agencies to regions, the possible relocation of major financial institutions, including policy lenders, is being mentioned. In the financial sector, tension is rising on expectations that state-run banks such as Korea Development Bank and IBK Industrial Bank of Korea could be included. The finance union has also moved to respond, strongly opposing the plan.

On March 16, related ministries and the financial sector said the government is reviewing a plan to select agencies for a second relocation phase through a full survey of public institutions and to pursue phased relocations from as early as 2027. The aim is to ease an industrial and population structure concentrated in the Seoul area and to encourage balanced national development.

The government is reported to be reviewing a direction to minimise exception criteria for target agencies while checking the "status of the second phase public agency relocation drive and future plans" at a recent National Policy Coordination Meeting. That means it will also re-examine exceptions for agencies that remained in the Seoul area during the first relocation phase on the grounds of "work characteristics."

Prime Minister Min-seok Kim (김민석) said it is the government's policy to minimise agencies remaining in the Seoul area and to avoid what he described as a "share-the-spoils" type of dispersed placement. He stressed that, based on the results and lessons from the first relocation phase, the exception criteria would also be re-examined from scratch.

As a result, policy financial institutions are being mentioned as major relocation targets in the financial sector. That is because financial institutions make up the core of key public agencies that remain in the Seoul area.

Some expect potential targets for review could include state-run banks such as Korea Development Bank, IBK Industrial Bank of Korea and the Export-Import Bank of Korea, as well as the Korea Deposit Insurance Corp, the Korea Trade Insurance Corp, the Korea Investment Corp and the Korea Credit Guarantee Fund. Prospects have also been raised that central cooperatives such as the National Agricultural Cooperative Federation and the National Federation of Fisheries Cooperatives could be included in discussions.

In particular, the financial sector sees whether Korea Development Bank is included as a key variable that will indicate the direction of the discussions. The bank previously faced labour-management conflict and staff outflow issues during a push to relocate it to Busan, so if relocation talks are raised again, attention across the sector is expected to focus on it.

Concerns are also being raised that relocation could reduce the efficiency of carrying out financial policy, given the nature of policy financial institutions' work. Policy lenders frequently collaborate among government ministries, companies and financial firms, and some point out that greater physical distance from Seoul's financial centre could affect decision-making speed and work efficiency.

Within the financial sector, there are also signs of a mood to watch developments as target agencies have not yet been confirmed.

A financial sector official said multiple possibilities are being discussed and actual target agencies have not been decided. The official said the point when the government's survey results and selection criteria are disclosed will be a turning point in the debate.

Finance union questions whether relocation plan is election-driven populism

The union is strongly opposing the plan. The National Finance Industry Union called for the second relocation drive to be halted, saying in a statement that pushing relocation again without an objective assessment and social consensus on the first phase undermines policy credibility.

The finance union argues that relocating policy financial institutions could weaken the competitiveness of the financial industry. It says the industry relies on networks and agglomeration effects, and separating key policy financial institutions from the Seoul area could weaken financial functions.

The union in particular said that moving quickly to push the relocation policy with just 3 months to go before local elections can only be seen as election-driven populism aimed at winning votes in specific regions.

The union has already launched a "joint response task force" on relocation to regions and built a response system. It warned it could launch a strong struggle if the government forces through the policy drive.

Some also expect it will take time before actual target agencies are confirmed. That is because the government is also working on mergers and closures among public agencies, raising the possibility that such restructuring and the selection of relocation targets could be reviewed together.

The financial sector expects discussions will expand in earnest depending on when the government's survey results and relocation criteria are disclosed, while concerns are also growing.

A financial sector official said a careful government approach appears necessary, as a full-scale relocation discussion is expected to hit organisational stability, including staff departures.

Another financial sector official also raised doubts about whether the first relocation phase was effective. The official said that, given there were cases of many departures due to the planned relocation of Korea Development Bank to Busan, the departure of skilled personnel would be inevitable and corporate competitiveness would decline.