[Relocation of Financial Public Institutions]② National Financial Competitiveness at Risk from "Regional Balance by Division"

Financial Services Commission and Financial Supervisory Service Likely to Move to Sejong, Discussion of Policy Banks' Regional Distribution

Talent, Information, and Capital Concentrated in Seoul... For Korea Development Bank and Export-Import Bank

With the announcement of the second public institution relocation roadmap imminent, the issue of whether the financial authorities and public financial institutions will relocate has resurfaced as a key point of contention. There are concerns within the financial sector that if relocations are pursued with an emphasis on “regional balance” without properly considering the functions of each institution and the unique characteristics of the financial industry, the cost of weakening national financial competitiveness could outweigh the benefits of balanced development. Calls are especially mounting to exercise caution when considering the relocation of state-run banks, which are involved in work where close ties to market players—such as corporate finance, investment, and restructuring—are essential.

Financial Services Commission and Financial Supervisory Service Likely Headed to Sejong...“Split Relocation” Discussed for State-run Banks

According to financial industry sources on August 18, it is highly likely that the government will include the relocation of financial authorities to Sejong in the second phase of the public institution relocation plan, which may be announced as early as next week.

The Financial Services Commission is seen as highly likely to move to Sejong, and it is understood that the Financial Supervisory Service also faces a strong possibility of relocation. Subsidiaries under the Commission, such as Korea Development Bank, Industrial Bank of Korea, Korea Deposit Insurance Corporation, as well as Korea Eximbank under the Ministry of Economy and Finance, are also being discussed as potential candidates for relocation. For state-run banks like Korea Development Bank, Korea Eximbank, and Industrial Bank of Korea, authorities are reportedly considering a “split relocation” model, distributing their facilities between Sejong, Naju, and Busan rather than concentrating them in a single location.

Within the financial sector, concerns have been raised that if the financial authorities leave Seoul—where private sector financial companies are clustered—the professionalism and efficiency of policy-making and oversight could decline. Given that these institutions must monitor the market in real time and maintain close communication with financial companies, greater physical distance may undermine their ability to respond effectively. Specifically, as the inspection division of the Financial Supervisory Service needs to conduct immediate inspections and cooperate with related agencies in the event of financial incidents, there are some who argue that certain functions should remain in Seoul.

However, sentiment within the financial authorities suggests that it would be difficult, in practice, to prevent the relocation. One official noted, “The government is moving forward with relocations in the name of balanced regional development, and since all agencies are under discussion, there are few strong arguments or justifications to refuse.”

Seoul’s Cluster of Talent, Information, and Capital...Location Is an Asset for State-run Banks

Experts caution that relocation of state-run banks should not be addressed by applying the same standards used for general public institutions. In the financial industry—where specialized talent, information, and networks are core assets—the location of Seoul, home to concentrations of financial companies, corporations, and investors, is itself key infrastructure underpinning competitiveness.

Even among state-run banks, opinions are emerging that relocation decisions should be based on the characteristics of each institution’s work. Unlike Industrial Bank of Korea, which serves small and medium-sized enterprises nationwide, Korea Development Bank and Korea Eximbank concentrate their specialized operations, such as corporate finance, investment, and project finance, at their headquarters—making direct market access even more crucial.

Korea Development Bank is responsible for corporate finance and industrial restructuring, as well as managing funds like the 200 trillion won National Growth Fund that invests in sectors such as high-tech strategic industries and venture businesses. In particular, areas such as investment and restructuring require rapid decision-making and close information exchange with companies, financial institutions, institutional investors, law firms, and accounting firms. Similarly, Korea Eximbank not only provides financial support to domestic exporters but is deeply involved in financing large-scale overseas projects such as infrastructure, plants, and defense. Since market access is critical for these operations, access to information and both domestic and international financial networks are essential competitive advantages.

Jeon Seonae, professor at Chung-Ang University’s Graduate School of International Studies, pointed out, “If work related to investment finance and corporate restructuring is relocated to regional areas en masse, it could result in the loss of experienced analysts and restructuring experts, delays in obtaining deal information, difficulties in finding co-investors, and slower response times to crises.”

In contrast, Kim Sangbong, professor of economics at Hansung University, argued, “With the advances in digital infrastructure, the necessity for financial public institutions to remain in Seoul has diminished,” adding, “Relocating public institutions to regional areas can help hire local talent and invigorate those regions.”

The Relocation Costs Demonstrated by the National Pension Fund...Loss of Top Talent Is Ongoing

The relocation of the National Pension Fund Management Center to Jeonju is considered a precedent highlighting the issue of talent outflow resulting from the regional relocation of financial institutions. The National Pension Service moved to Jeonju in 2015, and its fund management center followed in 2017. Since then, the outflow of personnel from the fund management center has continued, resulting in dozens of resignations each year. From 2020 to 2025 alone, 160 employees left their jobs.

Because compensation is lower than in private-sector financial companies—and the hardships of working in provincial areas are added on top—many skilled investment professionals who gained experience at the National Pension Service have moved on to asset management companies or securities firms in Seoul offering better pay and working conditions. This is fueling concerns that if the relocation of state-run banks becomes reality, the outflow of talented employees will only accelerate.

Some research also suggests that the National Pension Fund Management Center’s move to a provincial area may have affected its investment performance. According to a 2021 master’s thesis from Seoul National University’s Graduate School of Public Administration titled “Analysis of the Impact of the Regional Relocation of the National Pension Fund Management Center on Fund Performance,” the relocation was found to have decreased the return of overseas alternative investments by 9.5 percentage points compared to their benchmarks. Unlike domestic and international stock and bond investments, performance in overseas alternative investments is heavily influenced by access to private information and human networks. This underscores how weakened access to information and networks caused by physical distance from financial hubs may have affected investment outcomes.

One financial industry official commented, “Although the National Pension Service recently reported high returns thanks to rising stock prices in the United States and Korea, since there are no truly comparable peer institutions, it's hard to objectively evaluate its performance. If the outflow of skilled management staff had been minimized, even higher returns might have been possible.”

Ko Dongwon, head of financial law research at law firm Lin, emphasized, “Merely relocating financial public institutions—not private firms—has limits in terms of promoting balanced development and revitalizing regional economies. Since accessibility to markets and securing top talent are critical for financial institutions, it’s essential to prioritize each institution's unique functions and work characteristics over a blanket relocation policy.”

This content was produced with the assistance of AI translation services.