[1mm Financial Talk] "City Treasury Attraction? Include Ulsan in the Name"... Local Banks Break a Sweat

Regional banks are breaking a sweat ahead of the nationwide competition to secure local government treasury accounts in 34 municipalities, which will intensify in the second half of the year. This comes as demands for the social role of regional banks are increasing in local communities, with calls to "increase contributions" and "change the bank name." It is explained that this is due to commercial banks rolling up their sleeves to win local city and provincial treasury accounts beyond the metropolitan area.

According to the financial sector on the 1st, Ulsan Metropolitan City recently announced the 'City Treasury Designation Application Notice.' Ulsan City plans to hold a related briefing session on the 8th and then receive proposals on the 24th and 25th. The bank selected through the public competition will handle Ulsan City's treasury operations for the next four years.

At this point, Gyeongnam Bank is unexpectedly considering changing its bank name. One option is to include 'Ulsan' in the bank name. A Gyeongnam Bank official explained, "Nothing specific has been decided on which method to apply," adding, "It is true that we are reviewing various options."

The reason Gyeongnam Bank is considering a name change is because the atmosphere in Ulsan, which has started the city treasury selection process, is unusual. This follows the statement by Ulsan Mayor Kim Doo-gyeom that "If Gyeongnam Bank wants to take on Ulsan City's primary treasury, it must include 'Ulsan' in its bank name."

As of last year, Ulsan City's treasury, with a total budget of about 4.3 trillion won, has been managed for 26 years since its promotion to a metropolitan city in 1997 by BNK Gyeongnam Bank (primary treasury) and NH Nonghyup Bank (secondary treasury). However, the situation has become delicate recently as commercial banks actively enter the local treasury competition. Since the establishment of the Ulsan Business Headquarters earlier this year, Gyeongnam Bank has promoted the head of the Ulsan Business Headquarters to deputy general manager for the first time and is also expanding cooperative projects and contribution amounts with local governments.

BNK Busan Bank, its sister bank, is also on edge ahead of next year's city treasury competition. In addition to ongoing criticism in Busan's political circles regarding Busan Bank's contributions to the local community, rumors are circulating that some banks, including KB Kookmin and Hana Bank, are preparing challenges behind the scenes.

At last week's Busan City Council administrative inquiry, related criticisms continued. A ruling party city council member pointed out, "The primary treasuries of Incheon City and Busan City are Shinhan Bank and Busan Bank, respectively, but the cooperation project funds differ by four times," adding, "Incheon City achieved good results through competition, but Busan City has been monopolized for 24 years, so perhaps it has been neglected."

Industry insiders cite the presence of commercial banks that have recently entered the local treasury competition in earnest as the background of this trend. Recently, commercial banks have been actively pursuing institutional business such as treasury accounts for reasons including brand value enhancement, securing high-quality customers, and expanding deposit bases. Although not a local government, Chosun University, a private university in Gwangju, shocked the local community last month by changing its main bank from the regional bank Gwangju Bank to the commercial bank Shinhan Bank for the first time in 50 years.

Regional financial sectors find competition with commercial banks, which have enormous financial power, burdensome. An analysis of the Bankers Association disclosures by this publication shows that as of the end of June, the contributions (cooperation project funds) paid by the four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori) to local governments this year amounted to about 56.2 billion won, showing a stark difference compared to regional banks (1.1 billion won). A regional bank official said, "It is true that it has become quite challenging as commercial banks are targeting local treasuries beyond the metropolitan area," adding, "Since the scale of funds that can be mobilized is different, the concerns are deep."

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