[THE INVESTOR] Tension is growing between South Korean financial authorities and the trade unions of financial institutions ahead of an industry-wide labor strike slated for Friday.

The Financial Services Commission and the Financial Supervisory Service on Wednesday held an emergency meeting with the heads of seven commercial banks whose labor unions decided to go on strike this week to discuss contingency plans regarding possible inconvenience to consumers. The Korean Financial Industry Union has been warning the authorities of a massive strike as financial institutions were being forced by them to introduce the government-led performance-based evaluation system. 

The union announced Tuesday that about 100,000 union members will gather at the Seoul World Cup Stadium in Sangam-dong in western Seoul on Friday in opposition to the new evaluation system.

“About 10,000 bank branches across the nation will be paralyzed, and we ask for understanding from the public for the inconvenience,” the union said in a statement.

The industry-level strike will be the third in the history of the Korean banking sector, with the first in July 2000 and the second in September 2014.

“The banking industry is facing a crisis amid low growth, low interest rates and fintech growth,” said FSC Chairman Yim Jong-yong at the meeting. “Refusing to discuss the new merit salary system and choosing an extreme measure such as a strike will not only undermine the industry’s competitiveness but also harm public trust.”

The chairman urged bank CEOs to persuade employees to withdraw their plans to take part in the walkout.

Trade unions of the country’s commercial banks voted for a strike in July after the Korean Federation of Banks provided enhanced guidelines for the performance-based salary system, which will widen the difference between the salaries of the top performers and worst performers to 40 percent.

Most commercial banks have already adopted the system in response to a government initiative to reform the financial industry, but the adoption was limited to executives and branch managers. The remaining employees are still subject to a seniority-based salary system that does not take differences in performance into account.

“The union is arguing that the merit salary system is a legitimate pretext for the strike, but it will be hard for ordinary consumers to empathize,” said an FSC official. “Banks expect, at the maximum, 30,000 to 40,000 employees to participate.”

The KFIU said it is planning second and third rounds of strike unless bank managements drop their plans to expand the new salary system.

Major commercial banks are preparing contingency plans to minimize consumer inconvenience in the aftermath of the walkout.

Employees at headquarters might be dispatched to branches suffering severe workforce shortages during the strike.

“We have phase-by-phase contingency plans including operating hub branches while temporarily closing labor-strapped branches,” said Song Geun-heun, a senior manager at the PR department of KEB Hana Bank. “As many as 103 hub branches in the Seoul metropolitan areas will operate as per normal even in the worst case.”

Consumers may not feel as much inconvenience as in the past, as mobile and internet banking services are well established these days, the spokesman said.

The banks will stick to the “no labor, no pay” principle, the heads agreed at the meeting, while they pledged to do their best to change employees’ minds.

By Song Su-hyun/The Korea Herald (song@heraldcorp.com)