"Starting with 500 Billion KRW Capital: Blueprint for Establishing a Regional Bank in the Chungcheong Area"

[Asia Economy (Hongseong) Reporter Jeong Il-woong] Chungnam Province has unveiled a blueprint for establishing a regional bank in the Chungcheong area.

The province recently held the “Final Report Meeting on the Study for Establishing a Regional Bank in the Chungcheong Area.” The main outcome derived from the study is to establish a regional bank with a capital of 500 billion KRW by receiving investments from local affiliated companies, residents, financial institutions, and domestic and international pension funds, and to achieve profitability from the second year of operation through community-based relational finance.

The study was jointly conducted by the four metropolitan local governments in the Chungcheong area since June to secure the necessity of establishing a regional bank and to prepare practical plans for its establishment.

The study concluded that although the Chungcheong area’s Gross Regional Domestic Product (GRDP) exceeds 10% of the national total, the number of financial institution branches and deposit scale account for only 6% to 8%, indicating the need to establish a regional bank.

Furthermore, it is expected that the establishment of a Chungcheong regional bank will increase the benefits to local residents by reducing financial transaction costs and will boost production, added value, and employment in the financial industry.

The business model proposed includes core banking operations such as deposits and loans, community-based relational finance, digital finance utilizing innovative technologies, and regional win-win finance.

Regarding the governance structure in the early stages of establishing the Chungcheong regional bank, such as the board of directors or committees, it was suggested to keep the organization minimal to ensure efficient decision-making and reduce labor costs.

Most importantly, it was proposed to initially establish branches in 10 areas with dense populations or active industrial activities and one branch in Seoul, then expand to 98 branches once the bank enters a stable management phase.

The study estimated that the initial cost for building the IT system for the Chungcheong regional bank would be 83.4 billion KRW, with an annual maintenance cost of 32.1 billion KRW.

Regarding the profit and loss outlook, it predicted a deficit of 13.1 billion KRW in the establishment year, turning to profitability the following year.

As for investors and founding entities, the study suggested ▲ residents and companies in the Chungcheong region ▲ local governments ▲ big tech and fintech companies ▲ financial institutions or financial groups without banks ▲ holding companies owning regional banks ▲ joint investment by regional mutual savings banks ▲ strengthening the role of Hana Bank’s Chungcheong headquarters.

The province plans to use the results of this study as basic data to persuade financial authorities and to recruit capital investors.

Gil Young-sik, Director of the Provincial Economic Office, said, “Securing initial capital and major shareholders responsible for bank management is the most urgent issue for establishing the Chungcheong regional bank. We will comprehensively review the study results, promptly secure investors, and focus on establishing a bank that meets approval standards.”

Meanwhile, in the Chungcheong area, due to financial restructuring following the International Monetary Fund (IMF) bailout crisis, Chungcheong Bank closed in 1998 and Chungbuk Bank in 1999. Since then, there has been no regional bank in the Chungcheong area.

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