Strong Revival Movement for Regional Banks in Chungcheong Area: "Need for Fintech Integration and Strengthened Corporate Finance"

Chungcheong-Chungbuk Bank, All Exited Since the Foreign Exchange Crisis... Revival Debate Active in 4 Local Governments Due to Financial Imbalance
"When Establishing Banks, Fintech Integration, Strengthening Corporate Finance, and Branch Network Efficiency Are Necessary"

[Asia Economy Reporter Yoo Je-hoon] Recently, as voices demanding the "revival" of local banks in the Chungcheong region have grown louder, especially among metropolitan local governments in the area, there are claims that strengthening cooperation with fintech and big tech, optimizing branch networks, and enhancing corporate finance based on regional key industries and intellectual property (IP) are necessary for the development of local banks whose financial strength has weakened.

On the 18th, Yoon Chang-hyun, a member of the People Power Party, held a forum titled "Strategic Tasks for the Success of Local Banks in Daejeon, Chungcheong, and Si-jong Regions" at the National Assembly Members' Office Building in Yeouido, Seoul. In his opening remarks, Rep. Yoon explained the background of the event, stating, "Considering that the demand for financial services will gradually increase in Sejong City, where administrative agencies are concentrated, and in the Chungcheong region, which will be the center of the Yoon Seok-yeol administration's Central New Industry Belt, discussions on establishing a Chungcheong-based bank need to be actively pursued."

There were two local banks in the Chungcheong region: Chungcheong Bank, centered around Daejeon and Chungnam, and Chungbuk Bank, based in Chungbuk, but both were eliminated following the foreign exchange crisis. Currently, among the seven metropolitan areas nationwide, only the Chungcheong and Gangwon regions lack local banks.

The recent increase in calls for the revival of local banks in the Chungcheong region before and after elections is due to the expanding imbalance in financial services. For example, in Chungnam, as of 2019, the amount of capital outflow was 23.5958 trillion won, and the ratio of capital outflow to the regional gross domestic product (GRDP) was 20.8%, ranking first among the 17 cities and provinces nationwide. President-elect Yoon also emphasized the necessity during his election campaign.

Lee Byung-yoon, a research fellow at the Korea Institute of Finance, who presented at the forum, cited the advantages of establishing a local bank in the Chungcheong region as ▲ efficient capital supply to local small and medium-sized enterprises (SMEs) ▲ improved accessibility to banking services for local residents ▲ balanced regional development ▲ and creation of local jobs.

On the other hand, he pointed out the challenge that newly established banks are likely to become insolvent. The regional economy's financial strength has weakened due to the economic downturn, and the penetration of fintech and big tech into the financial industry, led by internet-only banks, is accelerating, raising doubts about profitability. This is why even currently operating local banks are struggling in regional operations and are pushing to expand into the metropolitan area.

Researcher Lee advised that to revitalize local banks, collaboration with fintech and big tech and optimization of branch networks are necessary. He stated, "Since local banks with insufficient capital find it difficult to compete with fintech and big tech through their own capabilities, they need to strengthen cooperation with them to expand their customer base and sales channels," adding, "Branch networks should also be optimized by operating them separately as central branches and peripheral branches using a 'hub and spoke' strategy."

In the subsequent discussion, it was pointed out that if a local bank is newly established in the Chungcheong region, attention should also be paid to strengthening corporate finance and increasing the financial sector's contribution to the region. Professor Kim Jun-il of Mokwon University mentioned region-specific, close-knit corporate finance based on technology, saying, "Financial supply is needed for technology development and supply chain securing, focusing on Chungcheong's key industries such as display, semiconductors, and secondary batteries," and advised, "Efforts should also be made to nurture local talent related to relationship finance through close connections with local residents and SMEs."

There was also advice to strengthen intellectual property (IP) finance by leveraging the region's characteristic of having many venture companies. Jeon Jong-hak, vice chairman of the Intellectual Property Association Federation, said, "If a Chungcheong-based local bank, under government policy support, proactively establishes an organization and functions specialized in IP-secured loans and operates a venture capital subsidiary specialized in IP finance, it is expected to greatly contribute to balanced regional development."

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