Competition for 51 Trillion Won Seoul City Treasury Begins... Data Center Relocation Emerges as New Variable

With Proposal Submissions Set for May 4-6,

Unexpected Expenses Like Data Center Relocation Emerge as Key Variables

Commercial Banks Weigh Symbolic Value Against Profitability

As the competition for the Seoul City Treasury contract, valued at 51 trillion won, intensifies, the city's plan to relocate its data center (IDC) has emerged as a new variable that could determine whether commercial banks participate in the bidding.

The bank selected as the Seoul City Treasury operator will be required to bear all costs associated with the data center relocation. In addition to the existing burdens of interest payments and contributions, unavoidable additional expenses will be incurred. This is expected to further deepen the concerns of banks that are weighing participation against profitability and the symbolic value of the contract.

According to the financial sector on April 15, during the 'Seoul City Treasury Designation Bid Briefing Session' held on April 9, the Seoul Metropolitan Government announced its plan to move the city treasury’s data center from its current location in Sangam-dong, Mapo-gu, to Seocho-gu.

The city is believed to have made this decision because, since the data center was first established in Sangam in 2010, there has been a surge in IT and media companies in the area, making it increasingly difficult to ensure stable power and network traffic. Seocho-gu is also home to the Seoul Metropolitan Data Center, a key ICT infrastructure facility, raising expectations for potential synergies if the relocation proceeds.

However, banks are facing a complicated situation. If the data center is relocated as planned, the bank chosen as the Seoul City Treasury operator will have to cover all system migration costs. This means banks will incur unexpected additional expenses. A representative from a commercial bank who attended the briefing session said, “The city appears to have disclosed the plan in advance with this in mind. Given the low profitability inherent in the Seoul City Treasury business, additional expenses are a sensitive factor that makes us hesitate to participate in the bidding.”

It was also mentioned at the briefing that thorough preparations must be made to ensure that the city’s tax payment mobile app (STAX) continues to operate reliably even after the treasury operator is selected. The operator not only manages the treasury but also oversees Seoul’s overall revenue management systems, including STAX. For banks other than the current operator, Shinhan Bank, this could mean additional infrastructure costs such as setting up a duplicate STAX system.

Being selected as the “treasury keeper,” responsible for managing the city’s annual budget and funds, carries significant symbolic value as it means overseeing the treasury of the national capital. In addition to attracting large deposits, the operator can acquire the city’s civil servants as high-quality customers and benefit from brand promotion. However, this also comes with considerable financial outlays, including high interest payments, large contributions, and IT management costs that must be borne independently. A commercial bank official pointed out, “If banks offer excessively high interest rates and contributions just to win the contract, it could ultimately result in unsustainable losses.”

The Seoul Metropolitan Government will accept bidding proposals from May 4 to May 6 and plans to select the treasury operator by the end of May. The contract period will run for four years, from 2027 to 2030. The treasury is divided into Treasury 1, which manages general and special account budgets, and Treasury 2, which manages the city’s funds. Currently, Shinhan Bank manages both Treasury 1 and Treasury 2. The recent bid briefing was attended by Shinhan Bank, as well as the previous operator, Woori Bank, KB Kookmin Bank, Hana Bank, NH Nonghyup Bank, and SC Bank Korea.

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