Financial institutions warn of massive costs as relocation push intensifies

As the government's second round of public institution relocations takes shape, financial institutions are raising alarm over the enormous costs involved — from building new headquarters and settling employees to repeated travel expenses and the risk of losing clients and business opportunities after the move.

According to the NH NongHyup Financial Group's union, the company estimates it would need at least 252 billion won ($179 million), excluding land acquisition costs, to relocate its headquarters. Construction of a new building is expected to cost more than 213 billion won, while employee housing support would add at least 39 billion won. The union estimates that only about 460 of the 1,167 staff at the central headquarters could realistically make the move — working out to more than 500 million won per person when relocation costs are divided by that figure.

Because a large share of financial business is concentrated in the greater Seoul area, recurring costs for business trips and extended stays are expected to continue even after relocation. The Financial Supervisory Service plans to conduct 707 inspections of financial companies this year, deploying a cumulative total of 28,229 personnel. The FSS union warned that with 91.6 percent of financial company headquarters and 88.3 percent of on-site inspection targets located in the metropolitan area, inspectors would inevitably have to make extended return trips to Seoul — a phenomenon the union called "reverse commuting."

Data from the National Assembly Budget Office backs up those concerns. A report released in April on the outcomes of the first round of public institution relocations found that 60 institutions had operated or were still operating shuttle buses to the greater Seoul area. The budget allocated to those services from 2010 to 2025 totaled 198.99 billion won. The financial industry argues that if such additional operating costs persist over the long term, they would effectively cancel out the benefits of relocation.

Beyond the one-time cost of moving and the recurring travel bills, the financial industry sees an even greater threat in client attrition and lost business. A study commissioned by Korea Development Bank's union from the Korean Finance Association in 2023 estimated that relocating to Busan would result in 7 trillion won in financial losses over the following decade — 6.53 trillion won from reduced revenue and 470.2 billion won in additional expenses related to the move and business travel.

A separate survey of Korea Development Bank's clients and partner organizations found that 83.2 percent believed the relocation would have a negative impact on their business dealings with the bank. Only 1.7 percent said they would move their own headquarters to Busan to follow the bank.

An official from the Export-Import Bank of Korea's union raised similar concerns, noting that the bank frequently needs to meet directly with foreign governments, project owners and embassies on matters involving defense exports, nuclear power plants, large-scale project financing and the Economic Development Cooperation Fund. "If the other parties won't come to a regional city, our staff will ultimately have to go to Seoul," the official said. "We need to look beyond just travel costs — there's also the cost of being shut out of deals and business relationships."

The potential impact on indirectly employed workers is another concern. Around 260 workers employed through Korea Development Bank's subsidiary KDB Biz handle facility management and cleaning at the Yeouido headquarters, while hundreds more work at Export-Import Bank subsidiary Sueun Plus. A Korea Development Bank union official warned that if the headquarters moves to a regional city, subsidiary employees tied to headquarters operations would have no choice but to lose their current jobs.

The financial industry is also pressing the government for clearer criteria on where institutions would be sent and how they would be grouped. Clustering securities firms, asset managers, banks and intermediaries in one place is essential to financial business, where information sharing, face-to-face collaboration and quick decision-making are critical. "If the goal is to turn Busan into a financial hub by bringing relevant institutions together, that's understandable," one industry official said. "But if institutions are scattered to different cities like Busan and Naju, the government needs to explain what kind of industrial synergy it expects to achieve."

The government has said it will not pursue a piecemeal approach. At a press briefing on Friday, Land Minister Kim Yun-deok said the plan was to concentrate institutions rather than distribute them. "This is absolutely not about divvying things up — it's about concentration," she said, adding that the aim was to generate spillover effects by pairing relocated public institutions with anchor companies and research institutes. The Financial Services Commission also plans to expand regional financial support through Korea Development Bank, Industrial Bank of Korea, the Korea Credit Guarantee Fund and the Export-Import Bank of Korea, with a target of scaling up policy fund supply to 164 trillion won annually by 2028.

Meanwhile, the National Assembly Budget Office has noted that the first round of public institution relocations cost a total of 9.15 trillion won across 105 institutions, yet six of the 10 innovation cities created under the program have seen their populations decline.