Daegu Bank Approved for Conversion to Commercial Bank... New Commercial Bank Established After 32 Years

"Expecting Increased Consumer Welfare Through Promotion of Competition in the Banking Industry"

The Financial Services Commission has approved DGB Daegu Bank's conversion to a commercial bank. This marks the launch of a new commercial bank after 32 years, and the financial authorities stated that competition among banks is expected to be stimulated, leading to increased consumer welfare.

On the 16th, the Financial Services Commission held its 9th regular meeting and resolved to grant a banking license for Daegu Bank, a regional bank in the Daegu-Gyeongbuk area, to convert into a commercial bank. This is the first new commercial bank to be launched in 32 years since the licensing of Peace Bank in 1992. It will be the seventh commercial bank following Shinhan, Woori, Hana Bank, Korea Citibank, KB Kookmin Bank, and SC First Bank (in alphabetical order).

The Financial Services Commission stated that with Daegu Bank's conversion to a commercial bank, competition among banks will be promoted, especially in the newly entered business areas, which is expected to increase consumer welfare. Daegu Bank plans to open 14 new branches in the Seoul metropolitan area, Chungcheong, and Gangwon regions over the next three years. The bank also announced that it will improve customer accessibility and reduce costs by advancing its own non-face-to-face channels (applications) and expanding partnerships with external platforms, thereby offering various low-interest products to consumers.

The bank will also expand its loan portfolio for medium-credit small and medium-sized enterprises and individual business owners. This will be based on the 'relationship banking' know-how accumulated as a regional bank and risk management capabilities appropriate for the expanded business area. As a commercial bank that will keep its headquarters in Daegu, it will continue efforts to revitalize the regional economy by expanding funding supply to companies in the Daegu-Gyeongbuk area after the conversion.

The authorities focused on the adequacy of the internal control system during the licensing review process. Following the 'illegal account opening' financial accident at Daegu Bank last year, various measures to strengthen internal controls were implemented. First, tailored countermeasures were prepared through analysis at each work stage. Specifically, customer notification was enhanced by sending alert messages when opening linked securities accounts, and additional steps such as identity verification and account password input were added.

Daegu Bank is implementing the 'Domestic Banks Internal Control Innovation Plan,' jointly developed by the authorities and the banking sector, faster than any other domestic bank (19 out of 21 tasks completed). The authorities explained that the bank is particularly focusing on strengthening compliance monitoring capabilities by establishing detailed operational standards for accident prevention measures and expanding and systematizing continuous monitoring. Efforts to establish an internal control organizational culture at the DGB Financial Group level are also ongoing, and key executives of Daegu Bank have submitted a pledge to strive for company-wide reform and prevention of financial accidents.

In July last year, the government announced plans to promote the conversion of regional banks into commercial banks to enhance competition in the banking industry. To clarify the methods and procedures for regional banks' conversion to commercial banks, the Financial Services Commission and the Financial Supervisory Service announced the 'Licensing Methods and Procedures for Regional Banks' Conversion to Commercial Banks' on January 31 of this year.

In February, Daegu Bank became the first regional bank to apply to the Financial Services Commission for a full banking license to change its license from a regional bank to a commercial bank based on Article 8 of the Banking Act. The Financial Services Commission and the Financial Supervisory Service thoroughly reviewed the licensing requirements through an external evaluation committee composed of private experts and ultimately judged that Daegu Bank meets all the licensing requirements for conversion to a commercial bank (capital, major shareholders, business plan feasibility, executives, personnel, business facilities, and IT system requirements).

The Financial Services Commission stated, "To ensure that institutional improvements work effectively and that a culture of compliance management is established at the frontline, we have imposed licensing conditions requiring periodic reports to financial authorities on the implementation status of internal control improvements after licensing. We plan to review the adequacy of the reports and take supplementary or corrective actions if necessary."