The Financial Industry Labor Union, the higher organization of the banking labor union, demanded the release of the Industrial Bank of Korea from public institution designation while forming a policy alliance with the Democratic Party of Korea for the presidential election. As the possibility of Lee Jae-myung’s election as the Democratic Party's presidential candidate increases, forecasts suggest that the Industrial Bank of Korea could be released from public institution designation for the first time in over a decade.
According to the financial sector on the 13th, the financial union recently signed a policy agreement with the Democratic Party of Korea, which included a review of the ‘release of the Industrial Bank of Korea from public institution designation’ in the agreement. The financial union declared support for the candidate, and the Democratic Party also decided to work on resolving financial sector issues.
As it is included in the policy agreement, if the candidate is elected, the next government is expected to consider the release of the Industrial Bank of Korea from public institution designation. Kim Hyung-sun, the head of the financial union, had also pushed for the release from public institution designation as a core business goal during his tenure as the union chair of the Industrial Bank of Korea.
The Industrial Bank of Korea is a state-run bank established to support policy financing for small and medium-sized enterprises and is designated as a public institution. Under the ‘Act on the Management of Public Institutions,’ the Industrial Bank of Korea is subject to the ‘aggregate personnel cost system.’ This means that the total personnel costs are restricted by the government, and the personnel costs can only be set within the annual increase rate capped by the Ministry of Economy and Finance.
The management of the Industrial Bank of Korea maintains that it is difficult to accept the union's wage increase proposal due to the aggregates of personnel costs. As a result, the management and the union have been in conflict since last year without reaching an agreement on wages and collective bargaining.
The union of the Industrial Bank of Korea argues that even though the work is not different from commercial banks, the disparities in working conditions are significant, and therefore the public institution designation should be lifted. Last year, the average annual salary of employees from the four major commercial banks, including KB, Shinhan, Hana, and Woori, was found to be 118.4 million won, which is 27.4 million won more than the 91 million won at the Industrial Bank of Korea. The union also claims that each employee has approximately 6 million won in unpaid overtime compensation.
The Industrial Bank of Korea is continuing a tough struggle, having gone on a general strike in December last year, and has announced plans for a second and third strike this year.
Previously, the Industrial Bank of Korea was excluded from public institutions in 2012 for the purpose of privatization but was re-designated as a public institution two years later in 2014. This is a result of the Industrial Bank of Korea's decision to strengthen support for policy financing for small and medium-sized enterprises and withdraw its privatization plans.
The government is reportedly in a position that it is difficult to release the Industrial Bank of Korea from public institution designation due to issues of equity among policy financing institutions. However, as the candidate strongly advocates for the reduction of the Ministry of Economy and Finance's authority, it remains uncertain whether the stance against the release of the Industrial Bank of Korea from public institution designation can be maintained.
A government official said, ‘In a situation where the public nature of policy financing is being further strengthened, it is difficult to lift the designation of only the Industrial Bank of Korea while excluding other policy financing institutions,’ adding, ‘There should be other issues in addition to wages to consider lifting the designation.’