Bank Loans, Annual Increase in Concentration in the Seoul Metropolitan Area

Bank Loans Account for 65% Compared to 52% of GDP in the Seoul Metropolitan Area
Only 2.22% and 1.43% in Gwangju and Jeonnam Respectively
Rep. Min Hyung-bae: "Finance Deepens Polarization Between Seoul Metropolitan Area and Provinces, Financial Dece

[Asia Economy Honam Reporting Headquarters Reporter Yoon Jamin] It has been revealed that the concentration of bank loans in the Seoul metropolitan area is increasing every year.

On the 2nd, Min Hyung-bae (Gwangju Gwangsan-eul), a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, stated, "Considering the proportion of companies located in the Seoul metropolitan area and the GDP contribution of the metropolitan area, banks are contributing to the regression of local decentralization and the polarization of wealth between the metropolitan and non-metropolitan areas. There is a need to foster regional banks and for national policy banks to make efforts toward balanced national development."

According to data submitted by the Financial Supervisory Service to Min Hyung-bae's office, as of the end of 2016, the outstanding loans of domestic banks in the Seoul metropolitan area (Seoul, Gyeonggi, Incheon) amounted to 920 trillion won, accounting for 64.53% of total loans. As of the end of June 2020, the outstanding balance increased to 1,182 trillion won, reaching 65.5%. In contrast, the loan proportion in non-metropolitan areas decreased from 35.46% (505 trillion won) at the end of 2016 to 34.49% (622 trillion won).

Looking at the annual trend, the proportion increased from 64.53% in 2016 to 64.51% (972 trillion won) in 2017, 64.71% (1,033 trillion won) in 2018, and 64.91% (1,101 trillion won) in 2019. In 2020, it exceeded 65% (65.5%, 1,182 trillion won). The total loan amount of domestic banks increased from 1,426 trillion won in 2016 to 1,804 trillion won as of the end of June 2020. During this period, loan amounts in both metropolitan and non-metropolitan areas increased, but the loan proportion in the metropolitan area deepened further.

By region, as of the end of June 2020, Seoul accounted for the largest share at 37.07%, followed by Gyeonggi Province at 23.08%. Busan accounted for 7.08%, and Daegu 4.67%. Gwangju accounted for only 2.22%, and Jeonnam was just 1.43%.

The problem is that banks are intensifying the concentration of wealth in the metropolitan area without considering balanced national development. The concentration of bank loans in the metropolitan area is excessive even when compared to the number of companies located in the metropolitan area or the GDP contribution. According to the Ministry of SMEs and Startups' 2018 data on the regional location of small and medium enterprises, the metropolitan area accounted for only 47.75%, and GDP contribution was 52.15%, both lower than the proportion of metropolitan area loans by domestic banks.

Min Hyung-bae pointed out that the cause of the concentration of bank loans is the shareholder value-oriented business structure of domestic banks that only pursues profitability and neglects social roles (balanced national development, alleviation of wealth polarization). In particular, under the oligopoly system of the five major domestic banks, the uniqueness or differentiation of regional banks has disappeared, leading to a reduction in non-metropolitan financial services. It is also problematic that national policy banks (Korea Development Bank, Industrial Bank of Korea, Export-Import Bank of Korea) do not pay much attention to balanced development.

Min said, "Finance should not become a means that widens the gap between the rich and the poor, and between the metropolitan and non-metropolitan areas," adding, "I will strive to review policies and propose alternatives for regional financial revitalization and financial decentralization to alleviate funding difficulties for non-metropolitan companies during the national audit."

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