[New Year Interview] "Quality Jobs Needed in Local Regions... Regional Banks Must Expand Their Role"

'2026 Economic and Financial Outlook' Relay Interview
③ Changyoung Lee, Executive Director and Head of ESG Strategic Management Research Institute, iM Financial Group
"Industrial Paradigm Benefits Concentrated in the Metropolitan Area... Decentraliz

"In a situation where everything from industries to people and capital is concentrated in the Seoul metropolitan area, creating a virtuous cycle requires first decentralizing quality jobs."

Changyoung Lee, Executive Director and Head of ESG Strategic Management Research Institute at iM Financial Group, emphasized in a New Year’s interview with The Asia Business Daily on January 19 that "attracting promising companies will increase quality jobs and draw population inflow to the regions, thereby creating a virtuous cycle where gross regional domestic product (GRDP) and investment rise within the region."

Changyoung Lee, Executive Director and Head of ESG Strategic Management Research Institute at iM Financial Group, is being interviewed by The Asia Business Daily on the 19th at the iM Financial Center in Jung-gu, Seoul. iM Financial Group

"Job Decentralization Essential for Regional Development... Foundation Is Key"

Executive Director Lee identified the disappearance of quality jobs in the provinces due to industrial restructuring as the fundamental cause of regional economic stagnation. From 2020 to 2024, the national GRDP growth rate was 129.3%, but Busan (88.7%) and Daegu (74.3%) fell short of this figure. In contrast, Gyeonggi Province posted a remarkable 238.8% growth rate. He explained, "While traditional manufacturing sectors such as shipbuilding, steel, and automobiles once led our economy, the industrial landscape is now being reorganized around artificial intelligence (AI), batteries, robotics, and semiconductors. These industrial ecosystem hubs are mainly forming in the Seoul metropolitan area, which is leading to population migration between regions."

He proposed forming a virtuous cycle through job decentralization as a way to overcome regional economic stagnation. For example, attracting promising companies increases quality jobs and the regional population, which in turn boosts GRDP and regional investment, leading to further regional development. To achieve this, it is essential to establish an industrial ecosystem tailored to each region’s characteristics and build a foundation for attracting and nurturing companies. In particular, he argued that local banks, which have strengths in fostering regional companies, should be utilized as the main agents for implementing the productive finance initiatives promoted by the current administration. Executive Director Lee highlighted, "Local banks have a 56.1% share of loans to small and medium-sized enterprises (SMEs), compared to just 41.5% at nationwide banks. This means local banks, through relationship-based finance, have a deep understanding of the circumstances of regional companies and can provide more detailed support."

"Local Banks Should Transform into 'Regional Banks' Focused on Functions and Roles"

Executive Director Lee stated that regional economic stagnation is also causing difficulties for local banks. He diagnosed that "the movement of industries, population, and capital is also changing the flow of finance," and that the sluggishness of regional SMEs, the core customer base, is negatively affecting the banks’ profitability and soundness. He added that the expansion of regional operations by nationwide banks and the rapid growth of internet banks have also had an impact.

As a way to revive both the regional economy and local banks, he presented the concept of a regional bank. This involves shifting from the geographically based concept of a local bank to a function-, role-, and responsibility-based concept of a regional bank. For example, transforming local banks into institutions that are headquartered in the region, conduct community-based operations, and support financial accessibility for local residents, thereby contributing to the revitalization of the regional economy. He also suggested that if local banks are granted the role of regional banks, local governments and public institutions in the region should be encouraged to use these banks.

Changyoung Lee, Executive Director and Head of ESG Strategic Management Research Institute at iM Financial Group, is being interviewed by The Asia Business Daily on the 19th at the iM Financial Center in Jung-gu, Seoul. iM Financial Group

The following is a Q&A with Executive Director Changyoung Lee.

-Regional economic stagnation is severe. What are the causes of regional economic stagnation?

▲The biggest cause is that the formation of new industrial ecosystems due to the industrial paradigm shift is leading to the disappearance of quality jobs in the regions. These industrial ecosystems are mainly formed in the Seoul metropolitan area. As of 2024, 77% of the top 500 companies by revenue and 78 out of the top 100 companies by market capitalization (as of 2025) have their headquarters in the metropolitan area. ISU Petasys, the top company by market capitalization in Daegu, and POSCO Future M, the top in North Gyeongsang Province, are ranked 77th and 45th on the KOSPI, respectively, and there are no regional companies from Busan or Gwangju among the top 100. Population migration between regions is a direct result of these industrial paradigm changes.

-What are some ways to overcome regional economic stagnation?

▲Quality jobs concentrated in the metropolitan area must be decentralized. This is because it enables the formation of a virtuous cycle: attracting promising industries (companies) leads to an increase in quality jobs, which increases the regional population, which in turn raises GRDP, expands regional investment, and thus fosters regional development. To this end, it is first necessary to create an environment where startups can actively emerge in the region by linking with local startup support organizations (such as technoparks). Since 2019, iM Bank has been supporting the Daegu Startup Campus, which is overseen by the Research and Development Special Zone Promotion Foundation. In cooperation with the Daegu Center for Creative Economy and Innovation, iM Bank provides a startup incubation space (5th floor of the second iM Bank headquarters) free of charge. It is also necessary to strengthen financial support for promising industries or SMEs in key regional areas, with local banks at the center.

-It is understood that local banks are also facing difficulties due to regional economic stagnation. What are the challenges?

▲The core customer base of local banks, regional SMEs, are struggling, which affects the banks’ profitability and soundness. Nationwide banks have strengthened their regional operations, taking over many local government and public institution accounts, which makes it harder for local banks. In addition, the three internet banks (KakaoBank, K Bank, and Toss Bank) now have outstanding household loans at a level similar to the six local banks (Gyeongnam, Gwangju, Busan, iM, Jeonbuk, and Jeju), and their rapid growth is putting additional pressure on local banks.

-Despite these challenges, how are local banks contributing to overcoming regional economic stagnation?

▲They are contributing to securing financial accessibility in their key business areas. The four major banks (KB Kookmin, Shinhan, Hana, and Woori) operate an average of 0.08 branches per 10,000 people, while local banks operate 0.5 branches per 10,000 people. The proportion of SME loans is also 56.1%, which is 15 percentage points higher than nationwide banks (41.5%), and more than half of all lending is allocated to SMEs, meaning local banks are playing a substantial role in supplying funds to the regional economy. Their contribution to the local community is also high relative to their profit scale. For example, in 2024, iM Bank’s community contributions accounted for 12.4% of its net profit, the highest proportion among banks.

Changyoung Lee, Executive Director and Head of ESG Strategic Management Research Institute at iM Financial Group, is being interviewed by The Asia Business Daily on the 19th at the iM Financial Center in Jung-gu, Seoul. iM Financial Group

-What measures can be taken to enhance the competitiveness of local banks?

▲It is to shift the concept of local banks to regional banks. Local banks are a legal classification based on the old "one province, one bank" system. They are defined solely by their geographic area of operation and do not include any specific roles or functions. In contrast, regional banks are defined by their functions, roles, and responsibilities. They are banks that contribute to the sustainability of the regional economy by facilitating local capital circulation, fostering industries, and enhancing financial accessibility. The idea is to rebuild the institutional status of regional banks within the context of the community and industry, rather than being limited to the geographic concept of "local."

-If regional banks fulfill their responsibilities, what roles or incentives would be appropriate?

▲It is necessary to grant regional banks priority designation rights when selecting local government accounts or to mandate that relocated public institutions transact with regional banks. This would strengthen the "regional capital recirculation system," where money spent in the region circulates within the region. If local government accounts deposit a certain amount of public funds with regional banks, these deposits can be used as a basis for lending, so the larger the deposits, the greater the lending capacity, and some funding stability can be secured. Since regional banks maintain a lending structure focused on local SMEs, increased lending capacity will flow into the regional economy, expanding its scale and transferring profits and income to businesses and households, thereby revitalizing the regional economy. As the regional economy becomes more active, transactions by local economic agents increase, and funds flow back into regional bank accounts, structurally strengthening the regional capital recirculation system. In the case of large nationwide banks, even if they collect deposits in the region, lending and investment are likely to be distributed nationwide, so the intensity of capital recirculation within the region will inevitably differ.

-What is the role of the iM Financial Group ESG Strategic Management Research Institute?

▲It is a think tank dedicated to the sustainable growth of iM Financial Group and the development of the regional economy. As ESG (Environmental, Social, and Governance) is in its name, it also serves as the control tower overseeing and coordinating the establishment and implementation of the group’s ESG strategy. It establishes the group’s ESG vision and mid- to long-term strategies, and translates them into detailed action plans tailored to the business characteristics and roles of each affiliate. Through this, it ensures that ESG management does not remain a declarative goal but operates as a practical management system.

-Have you made any policy recommendations to financial authorities or others to promote regional economic development or revitalize local banks?

▲One example is allowing local banks to handle housing and urban fund loans and the issuance of National Housing Bonds. Before the policy change, housing and urban fund loans were limited to the five major nationwide banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup). There was an inconvenience in that while housing subscriptions could be made at local banks, the actual loans had to be taken out at nationwide banks, which meant that the extensive network of local banks with high regional financial accessibility was underutilized. We continuously highlighted these structural inefficiencies and shared the need for institutional improvement, and through discussions, the system was revised to enhance regional financial accessibility.

◆Profile: Changyoung Lee, Executive Director and Head of ESG Strategic Management Research Institute at iM Financial Group

▲Born in 1970 ▲Master’s in Trade and International Business, Kyungpook National University ▲Ph.D. in Human Resources and Organization, Yeungnam University ▲Former Head of ESG Strategic Management Research Institute, iM Financial Group ▲Former Head of Corporate Management Consulting Center, iM Bank ▲Former Head of People & Culture, iM Financial Group ▲Former Secretary General of the Board of Directors, iM Financial Group ▲Current Head of ESG Strategic Management Research Institute and Secretary General of the Board of Directors, iM Financial Group (since January 2025)