Foreign Investors Steer Clear of Korean Banks

Hong Sung Sook, a Seoul housewife, says she’s getting ready to pull $100,000 of savings out of Standard Chartered’s South Korean unit and put it in a local bank. The reason? Standard Chartered’s efforts to base pay on performance, which it says will improve competitiveness, led workers to stage an extended strike that started on June 27. “The strike was the last straw,” says Hong. “I’ve been a loyal customer for three decades, even though the service was bad and it paid lower interest than other Korean banks.”

The difficulties of London-based Standard Chartered help explain why foreign companies are reluctant to invest in Korea’s financial sector. Six years have passed since any overseas investor has acquired a Korean financial company valued at more than $500 million, according to data compiled by Bloomberg. South Korean President Lee Myung Bak’s latest effort to sell Woori Finance Holdings collapsed last month after the company failed to attract bids from abroad. Woori was created in 2001 as a holding company for banks that taxpayers bailed out following the Asian financial crisis in 1997-98. “It’s clearly negative for foreign investors in any country to see a strike like this,” says James Rooney, chief executive officer of consulting firm Market Force in Seoul.