Primary Treasury Local Banks Account for Only 5%
Jeonbuk, Jeonnam, Gyeongnam, Gyeongbuk, Jeju Use Nonghyup Bank as Primary Treasury Bank
Fierce Competition Expected This Year for 34 Locations
Regional banks (Busan, Daegu, Gyeongnam, Gwangju, Jeonbuk, Jeju) are struggling in the bidding war for local government treasury banks. This is because city banks with strong financial power are expanding their influence in the provinces by mobilizing large contributions. A fierce competition between city banks and regional banks is expected over 34 local government treasuries whose contracts expire this year.
According to the financial sector on the 19th, among the 174 local government treasuries nationwide (excluding autonomous districts), the proportion occupied by six regional banks?Busan, Daegu, Gyeongnam, Gwangju, Jeonbuk, and Jeju?was 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, local taxes, and so on. In most cases, different banks share the 1st and 2nd treasury banks, with the 1st treasury bank managing a larger amount of funds and thus considered the 'prime' treasury.
Looking only at the key 1st treasury banks, the share of regional banks shrank even further. Among the 1st treasury banks of 174 local governments during the same period, the proportion of regional banks was 5% (10 locations). Less than one out of ten, their presence was minimal.
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, and 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 had NongHyup Bank as their 1st treasury bank. At least the 2nd treasury banks were designated as Jeonbuk, Gwangju, Gyeongnam, and Jeju Banks. Gyeongbuk had both 1st and 2nd treasury banks assigned to NongHyup Bank. Despite having regional banks in those areas, many did not designate them as 1st treasury banks.
This trend was 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, and in Jeonnam, except for Mokpo (Gwangju Bank), all had NongHyup Bank as their 1st treasury bank. In Gyeongbuk, except for Pohang, Gumi, and Gyeongsan (Daegu Bank), all had NongHyup Bank as their 1st treasury bank, and notably, Andong, Uljin, and Uiseong had even their 2nd treasury banks assigned to city banks such as Kookmin Bank and Shinhan Bank. In Gyeongnam, only Changwon had Gyeongnam Bank as its 1st treasury bank, while the rest were NongHyup Bank.
The infiltration of city banks into the provinces is accelerating further. In the case of Gwangsan-gu, Gwangju, which re-designated its treasury bank this year, Gwangju Bank gave up the 1st treasury bank to NongHyup Bank. A few years ago, Gwangju Nam-gu and Andong, Gyeongbuk, also saw Gwangju Bank and Daegu Bank hand over their 2nd treasury banks to Kookmin Bank and Shinhan Bank, respectively. In the past, regional banks with local bases enjoyed a dominant position in the treasury market, but the situation has completely changed.
This year, contracts for treasury banks in 34 local governments, including Daegu and Ulsan city halls and Chungnam provincial office, will expire, and a fierce competition for recruitment is expected. It is already known that city banks are making efforts to attract treasuries by providing contributions to local governments.
The sense of crisis among regional banks is also growing. A representative of a regional bank said, “The role and contribution of regional banks, such as actively engaging in social contribution activities in local governments, are incomparably greater than those of city banks, but since the landscape has changed, we are responding with vigilance to avoid losing the treasury.”
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