Only 3 out of 10 Local Government Treasury Accounts Are with Regional Banks... Contributions from 4 Major Banks Reach 60 Billion Won (Comprehensive)

Primary Treasury Account Local Banks Share Only 5%
Jeonbuk, Jeonnam, Gyeongnam, Gyeongbuk, Jeju Use NongHyup Bank as Primary Treasury Account
Intense Competition Expected for 34 Locations This Year
Concerns Over Excessive Contribution Competition... Commercial Banks 51 Times Larger Than Local Banks

Regional banks (Busan, Daegu, Gyeongnam, Gwangju, Jeonbuk, Jeju) are struggling in the bidding war for local government treasury banks. With fierce competition expected between commercial and regional banks over 34 local government treasuries expiring this year, it has been revealed that major commercial banks contributed a total of 60 billion KRW to local governments in the first half of this year to secure these treasuries.

According to the financial sector on the 20th, among the 174 local government treasuries nationwide (excluding autonomous districts), the six regional banks?Busan, Daegu, Gyeongnam, Gwangju, Jeonbuk, and Jeju?account for 36% (63 locations). Each local government selects treasury banks (1st and 2nd treasury banks) every 3 to 4 years to deposit and manage government grants and local taxes. In most cases, different banks share the 1st and 2nd treasury roles, with the 1st treasury bank managing a larger amount of funds and thus considered the 'prime' position.

Looking only at the key 1st treasury banks, the share of regional banks shrinks further. Among the 174 local governments’ 1st treasury banks, regional banks account for only 5% (10 locations), showing a minimal presence with less than one out of ten.

First, looking at the 17 metropolitan city halls and provincial offices, Busan City Hall and Daegu City Hall designated Busan Bank and Daegu Bank as their 1st treasury banks, respectively, while Gwangju City Hall and Ulsan City Hall entrusted their 1st treasury banks to Gwangju Bank and Gyeongnam Bank. However, Jeonbuk, Jeonnam, Gyeongnam, and Jeju provincial offices all designated NongHyup Bank as their 1st treasury bank. At least the 2nd treasury banks were assigned to Jeonbuk, Gwangju, Gyeongnam, and Jeju Banks. Gyeongbuk had both 1st and 2nd treasury banks assigned to NongHyup Bank. Despite the presence of regional banks in these areas, many did not designate them as 1st treasury banks.

This trend is even more pronounced at the city and county level. In Jeonbuk, except for Jeonju (Jeonbuk Bank), all other cities and counties designated NongHyup Bank as their 1st treasury bank. Similarly, in Jeonnam, except for Mokpo (Gwangju Bank), all designated NongHyup Bank as their 1st treasury bank. In Gyeongbuk, except for Pohang, Gumi, and Gyeongsan (Daegu Bank), all 1st treasury banks were NongHyup Bank, and notably, Andong, Uljin, and Uiseong had their 2nd treasury banks assigned to commercial banks such as Kookmin and Shinhan. In Gyeongnam, only Changwon had Gyeongnam Bank as its 1st treasury bank, while the rest were NongHyup Bank.

[Image source=Yonhap News]

The infiltration of commercial banks into local areas is accelerating. In the case of Gwangsan-gu in Gwangju, which re-designated its treasury bank this year, Gwangju Bank lost the 1st treasury bank position to NongHyup Bank. A few years ago, Gwangju Nam-gu and Andong in Gyeongbuk also saw Gwangju Bank and Daegu Bank hand over their 2nd treasury banks to Kookmin Bank and Shinhan Bank, respectively. While regional banks with local bases once enjoyed a dominant position in the treasury market, the situation has completely changed.

This year, the treasury bank contracts of 34 local governments, including Daegu and Ulsan city halls and Chungnam provincial office, are expiring, and a fierce competition for acquisition is expected. Commercial banks are already making efforts to secure treasuries by providing contributions to local governments. An analysis by Asia Economy of the Bank Federation’s disclosures showed that the four major commercial banks (KB Kookmin, Shinhan, Hana, Woori) paid a total of 56.288 billion KRW in contributions (cooperation project funds) to local governments as of June this year. Woori Bank contributed the most with 28.339 billion KRW (13 cases), followed by Shinhan Bank with 12.547 billion KRW (10 cases), Kookmin Bank with 11.742 billion KRW (7 cases), and Hana Bank with 3.66 billion KRW (1 case). This amount is 51 times the contributions made by regional banks. During the same period, among regional banks, only Gyeongnam Bank contributed 1.1 billion KRW (1 case).

Regional banks are also feeling a growing sense of crisis. A regional bank official said, “Although regional banks’ roles and contributions, such as active social contribution activities in local governments, are incomparable to those of commercial banks, we are responding with heightened awareness to avoid losing treasury contracts as the landscape has changed.”

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