Regional Reinvestment Evaluation Report: NongHyup and KIE 3 Consecutive Years 'Best', SC First and Citi 'Insufficient'

[Asia Economy Reporter Song Hwajeong] As a result of the regional reinvestment evaluation of financial companies, NongHyup Bank and Industrial Bank of Korea received the 'Excellent' grade, marking the third consecutive year of top ratings since the first evaluation in 2020.

On the 26th, the Financial Services Commission and the Financial Supervisory Service announced the '2022 Regional Reinvestment Evaluation Results of Financial Companies.'

The regional reinvestment evaluation was introduced to encourage financial companies that receive regional deposits to support local economic growth, and evaluations have been conducted since 2020.

In this year's evaluation, among commercial banks, NongHyup Bank and Industrial Bank of Korea received the highest overall grade of Excellent. NongHyup Bank achieved Excellent grades in 9 regions, Industrial Bank of Korea in 5, Hana Bank in 4, Kookmin Bank in 3, and Shinhan Bank in 1.

Among regional banks, Gwangju Bank, Jeonbuk Bank, and Gyeongnam Bank received the highest overall Excellent grade. Regional banks received either Excellent or Good grades in their head office locations and nearby areas due to outstanding fund supply performance and financial infrastructure.

Among savings banks, none received the overall Excellent grade. OK Savings Bank, BNK Savings Bank, Equion Savings Bank, Yegaram Savings Bank, and JT Chin-ae Savings Bank received Good grades. OK, BNK, Yegaram, and JT Chin-ae Savings Banks each received an Excellent grade in one region.

On the other hand, SC First Bank and Citibank received the lowest grade of 'Unsatisfactory.' Notably, SC First Bank recorded Unsatisfactory for three consecutive years. Among savings banks, Daishin and OSB each received Unsatisfactory grades.

In the third evaluation conducted this year, the evaluation indicators were improved to actively reflect efforts to enhance offline financial accessibility for financial consumers such as the elderly. Accordingly, the score for investment in financial infrastructure such as branches and ATMs was raised from 10 points to 15 points. A new bonus point (1 point) was introduced for post office business partnerships, while a penalty (1 point) was newly applied to institutions that did not provide prior notice or conduct prior impact assessments when closing branches. Additionally, for joint branches, the number of branches of all participating institutions was recognized.

Regarding the status of regional reinvestment by banks, as of last year, the loan scale to evaluation regions (non-metropolitan areas) increased compared to the previous year, but the growth rate was 6.7%, somewhat lower than the previous year's 9.8%. A Financial Services Commission official explained, "It is presumed that the rapid increase in household loans across the financial sector after COVID-19 was moderated last year due to strengthened management efforts by financial institutions and the Bank of Korea's interest rate hikes."

The loan-to-deposit ratio in evaluation regions was 131.3%, up from 127.4% the previous year, showing a higher level compared to the metropolitan area (91.2%).

As of 2021, the proportion of loans to small and medium-sized enterprises (SMEs) within corporate loans in evaluation regions was 95.9%, the same as the previous year, and the growth rate of SME loans was 7.8%. The proportion of loans to low-income households compared to household loans in evaluation regions was around 0.5%, slightly down from 0.6% the previous year. The growth rate of loans to low-income households recorded -11.7%, turning to a decline.

The number of branches per million people in evaluation regions was 106.6, lower than the metropolitan area's 126.5. Although it decreased by 5.0 compared to the previous year, it was a more gradual decline than the metropolitan area's decrease of 6.4. This is interpreted as banks mainly reducing overlapping branches within the metropolitan area.

A Financial Services Commission official stated, "The results of the regional reinvestment evaluation are used for management performance evaluations (by the Financial Supervisory Service) and criteria for selecting local government and local education office depositories," adding, "We will continue to consult with related institutions to increase the utilization of the regional reinvestment evaluation and continuously review institutional improvements to enhance evaluation validity in line with changes in the financial environment."

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