Korean Banks Struggle To Penetrate ASEAN

The nation's major banks are having a hard time making inroads into Southeast Asia as their future growth engine despite the government's strong drive to promote the region.

The Financial Supervisory Service (FSS) said local lenders have opened 428 branches abroad as of September 2017. Their earning dependence on foreign branches was only 4.6 percent on average, a stark contrast to global financial companies' figures. 
Banking giant Citi Group's dependence on foreign branches reached 54 percent.
In a bid to diversify their profit portfolio, the nation's major banks are gearing up to open more branches abroad, especially in Southeast Asian countries. Of their 428 foreign branches, Korean banks have opened 156 branches in 10 ASEAN countries and India. 
The figure is 36 percent of their total foreign branches. Forty-eight branches are located in Vietnam followed by Indonesia with 24 and Myanmar with 20 branches. 
Banks said an increasing number of Southeast Asian countries have strengthened the minimum capital requirement while limiting foreign shareholders' portion in foreign banks' entry to the region.
Thailand demands at least 692.2 billion won (20 billion Thai baht) as the minimum capital requirement for foreign banks' entry to the country. Indonesia also sets about 300 billion won for the capital requirement. 
"Considering the size of their economies, their demand for a minimum capital requirement is absurdly high," a financial circle insider said.
"They have raised the hurdles as an increasing number of advanced economies compete with each other over entry to the region." 

There is also a trust issue.
During the IMF crisis, Korean banks withdrew from Thailand in 1997 despite the Thai government's opposition. Due to their withdrawal, the Thai government decided to prohibit Korean banks' entry to the country until 2020.
Only Samsung Life Insurance decided to stay in Thailand, managing to turn a profit last year for the first time in 10 years.
Some experts point out Korean banks operating in the region have focused mainly on the micro finance sector to enjoy short-term return with high-interest loans.
"Such practices won't help Korean banks' entry to Southeast Asian countries in the future," KDB researcher Kang Myeong-koo said.
"Learning from the experience with Thailand, banks should maintain consistent operations in the region to win their trust while introducing differentiated strategies to attract locals."
KEB Hana Bank signed a strategic partnership MOU with Laos' top bank by assets last July, establishing a foothold in the region.
The agreement was aimed at boosting the two lenders' partnership on remittance and trade financing. KEB Hana said the collaboration will allow the two sides to provide financial services to Laotians working in Korea.