Macquarie Bank has decided to shutter its banking operations in South Korea, becoming the sixth foreign investment bank over the last two years to scale down business in Asia’s fourth-largest economy amid stagnancy in capital investment.

Macquarie Korea said the move was part of its ongoing efforts since last year to merge its banking and securities operations into a single Commodities and Global Market Group. While the banking unit would be shut down, the securities business would continue, it said.

This arrangement would be similar to Goldman Sachs, which closed its banking office last year but chose to retain its securities operations in Korea.

Global banks have been downscaling their Korean operations since last year. Along with Goldman Sachs, four more banks have shut down their banking businesses after regulatory approval, including Royal Bank of Scotland, Banco Bilbao Vizcaya Argentaria (BBVA), Barclays and UBS. The number of outlets run by foreign banks in the country has fallen to 45 of 38 banks.

Analysts say the latest pullout is due to tougher global regulations on derivatives trading in the wake of the 2008 global financial meltdown triggered by the subprime mortgage crisis and reduced profitability in derivatives.

Unlike Korean banks that engage heavily in commercial banking such as personal loans, global investment banks pull in a large part of their revenue from derivatives. Derivatives demand by Korean capital is mostly limited to underlying listed assets of Korea and Hong Kong. Appetite in derivatives soured due to a fall in Hong Kong and mainland Chinese enterprise stocks.

By Chung Joo-won and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]