The United Kingdom launched its first plan to relocate public institutions out of the capital in 1963, aiming to promote balanced regional development and cut agency costs. Starting with departments that had relatively little need to meet with ministers or stakeholders, 22,500 jobs were moved to outlying areas by 1972. Another 19,000 followed between 1989 and 1993, and 21,500 more between 2004 and 2010. Even the public broadcaster, the BBC, was not exempt.
Last year, the British government said it would cut 12,000 public-sector jobs in London and relocate them to the regions by 2032. Prime Minister Andy Burnham, who took office last month, made regional devolution a central policy priority, establishing a second prime minister's office in Manchester.
Even in Britain, which has pursued the relocation of public institutions for more than 60 years, finance has seen little change. Unlike South Korea, which seeks to disperse financial regulators and policy finance institutions outside the capital region, Britain has kept its major institutions in the capital to preserve clustering effects as much as possible.
The Bank of England (BOE), the Financial Conduct Authority (FCA) and the Financial Services Compensation Scheme (FSCS) are all headquartered in London, financial industry sources said on the 25th. The British Business Bank (BBB) and the National Wealth Fund (NWF) are based in Sheffield and Leeds, but they were established in 2012 and 2024, respectively.
France is not much different. Having launched its public-institution relocation policy in earnest in 1955, France began moving its elite grandes écoles higher-education institutions to the regions in the early 1960s. Between 1991 and 2005, it sent 35,000 people to the regions through DATAR, a regional development policy agency under the prime minister. Relocations continued afterward. Yet France, too, keeps its central bank, its deposit insurance body (FGDR) and the Caisse des Dépôts (CDC) in Paris. "Countries like Britain and France relocated public institutions to the regions, but their financial institutions have remained in the capital," said Jeon Seon-ae, a professor at Chung-Ang University. "Finance requires that regulators, financial firms and state-run financial companies be clustered together."
At 6 a.m. on Sunday, May 6, 2012, the Financial Services Commission (FSC) abruptly announced the suspension of Solomon — then the industry's largest savings bank — along with Korea, Mirae and Hanju savings banks. It reached the decision by convening an emergency FSC meeting at 3 a.m. The regulator took emergency action after concluding that the firms could no longer stay afloat.
By its nature, finance can require emergency responses in the evening after markets close, in the early morning, or on weekends — matters directly tied to the national economy. The following examines four checkpoints that should be considered in relocating financial institutions, including financial stability.
Slower Emergency Response if the FSC Moves
The FSC is a collegial administrative body. It is composed of the FSC chairman, a vice chairman, two standing commissioners and one non-standing commissioner, along with the vice minister of economy and finance, the governor of the Financial Supervisory Service, the president of the Korea Deposit Insurance Corporation and the senior deputy governor of the Bank of Korea. Moving to Sejong would bring it closer to the finance ministry but farther from the Korea Deposit Insurance Corporation, the Bank of Korea and others. The Securities and Futures Commission (SFC) faces a similar situation. The SFC can pass motions only with the approval of at least three of its five members, and all three of its non-standing members are professors at universities in Seoul. Convening emergency meetings and reaching quick decisions could prove difficult in urgent situations.
Financial firms that must coordinate closely with financial authorities in times of crisis are also concentrated in Seoul. After a U.S.-Iran war broke out in late February this year, the FSC held emergency meetings for four straight days. On those occasions, not only the Bank of Korea and the Financial Supervisory Service but also major institutions such as the Korea Development Bank, IBK, the Korea Credit Guarantee Fund and the Korea Exchange, along with domestic and foreign securities firms, sat down repeatedly to discuss crisis-response measures.
54% of Bank Deposits Concentrated in Seoul
Some point out that the financial imbalance between the capital region and the rest of the country stems not from a shortage of financial institutions but from a lack of an industrial base such as manufacturing and services. Seoul accounts for only 22% of the country's gross regional domestic product (GRDP) but holds 54.8% of deposits and 42.2% of loans at the nation's deposit-taking banks.
The problem is that of the country's 8.3 million small and medium-sized enterprises, 52.6% are concentrated in the capital region of Seoul, Gyeonggi and Incheon. According to the Bank of Korea, as of June this year, deposit-taking banks' lending to small and medium-sized enterprises reached 641.1 trillion won in Seoul and Gyeonggi, or 56.3% of the total. By contrast, the figure stood at 85.3 trillion won in Busan, 59.7 trillion won in Daegu, 32.1 trillion won in Gwangju and 24.2 trillion won in Daejeon.
The Bank of Korea's Bank Intermediated Lending Support Facility, which supplies funds at low rates, requires that more than 50% be channeled to small and medium-sized enterprise loans, but regional banks were found to have failed to meet that ratio. A senior official at a regional financial holding company said, "It's not that there is a shortage of loans in the regions." The official added, "If regional industries do not recover, it makes no difference even if state-run banks come."
Relocation Is No Cure-All
Relocating public institutions does not translate directly into revitalizing regional economies. According to the National Assembly Budget Office, 105 public institutions were relocated to the regions in a first round from 2010 to 2019 at a cost of 9.1549 trillion won, but the effect on GRDP was limited.
Between 2020 and 2022, the country's GRDP grew 12.9%, but Jeonju in North Jeolla Province, to which the National Pension Service moved, rose just 4.3%. Wonju in Gangwon Province, which received the National Health Insurance Service and the Korea Tourism Organization, grew 12.3%, and Jinju in South Gyeongsang Province, to which the Korea Land & Housing Corporation (LH) and Korea South-East Power moved, grew 10.8% — both below the national average.
Financial Network Effects Must Be Considered
Experts point out that finance can generate synergy only when it is clustered together. "The fact that Seoul is the center of finance will not change, so if only financial institutions are scattered across the country, network effects will disappear and the efficiency of finance will inevitably decline," said Shin Jin-young, a professor at Yonsei University's School of Business who chairs the Financial Development Council. "We should consider that keeping the financial authorities in Seoul until now was not because they are special, but because of the nature of the industry itself."
