Domestic Banks' Relational Finance Performance Surpasses 12 Trillion Won Last Year... NongHyup Selected as Outstanding Bank

[Asia Economy Reporter Song Hwajeong] Last year, relational finance by domestic banks exceeded 12 trillion won, showing an increase of more than 20% compared to the same period the previous year. NongHyup Bank and Gwangju Bank were selected as excellent banks for relational finance in the second half of last year.

According to the "2021 Domestic Banks' Relational Finance Handling Performance and Excellent Bank Selection Results" announced by the Financial Supervisory Service on the 3rd, the balance of relational finance at the end of last year was 12.4 trillion won, an increase of 20.8% compared to 10.3 trillion won at the end of the previous year.

By borrower type, loans to small and medium-sized corporations amounted to 9.7 trillion won (78.2%), and loans to individual business owners were 2.7 trillion won (21.8%). Loans to individual business owners increased by 1.5 trillion won compared to the end of the previous year, leading the growth trend, while loans to small and medium-sized corporations also increased by 600 billion won.

By industry, wholesale and retail trade accounted for 31.3%, manufacturing 30.6%, services 14.4%, and food and accommodation 6.9%. Recently, the proportion of wholesale and retail trade has continued to increase, surpassing manufacturing by the end of last year.

The average loan interest rate was 2.83%, rising by 0.38 percentage points from 2.45% at the end of the previous year due to the base interest rate hike, but it remained lower than the average interest rate for all small and medium-sized enterprise loans (3.11%).

In the selection results for excellent relational finance banks in the second half of last year, NongHyup Bank and Shinhan Bank ranked first and second respectively among large groups. NongHyup Bank excelled in business agreements, number of contracts, proportion of loans to start-ups, and proportion of loans to self-employed individuals. Shinhan Bank scored high in cumulative supply amount and proportion of unsecured loans, although its proportion of loans to start-ups was insufficient. Among small and medium-sized groups, Gwangju Bank and Gyeongnam Bank were selected as first and second. Gwangju Bank excelled in the number of business agreements and proportion of loans to low-credit borrowers, while Gyeongnam Bank showed relatively low performance in non-financial services but scored high in the proportion of loans to self-employed individuals.

Relational finance refers to banks providing long-term loans of over three years, equity investments, and non-financial services such as management consulting to small and medium-sized enterprises, including small and medium-sized corporations and individual business owners, by comprehensively evaluating quantitative and qualitative information, even if creditworthiness is low or collateral is insufficient, provided the business outlook is favorable. The Financial Supervisory Service evaluated, "Despite COVID-19 last year, support was expanded through the activation of relational finance, continuously supplying stable long-term funds of over three years to small and medium-sized enterprises." It also noted, "In particular, the relaxation of business duration restrictions for individual business owners expanded the supply of relational finance to individual business owners who are prone to financial difficulties."

The Financial Supervisory Service plans to continue expanding the supply of relational finance to support individual business owners and small and medium-sized enterprises in overcoming the COVID-19 crisis. A Financial Supervisory Service official stated, "We will encourage banks to actively handle relational finance for self-employed individuals such as individual business owners and small and medium-sized corporations through bank meetings this month." He added, "We also plan to actively promote the establishment of a virtuous cycle structure where banks utilize soft information identified during management consulting provided to individual business owners to supply relational finance."

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