Competition is heating up as Nonghyup Bank and local banks face challenges from major commercial banks in the local government treasury market, which they have dominated for years. With Incheon, Gyeongbuk, and Jeonnam-Gwangju, which together manage an annual budget of approximately 57 trillion won, selecting new banking partners, the race for treasury management is intensifying.
According to the financial sector, Incheon will accept applications for its next treasury designation from August 28 to September 2. A review will take place in September to select the preferred candidates. The new treasury will manage Incheon’s finances from 2027 to 2030.
Incheon’s treasury manages an annual budget of about 17 trillion won. Currently, Shinhan Bank holds the first treasury position, while Nonghyup Bank manages the second. Industry insiders see a high likelihood of a showdown between Shinhan Bank, which has held the first treasury position for nearly 20 years, and Hana Bank, which is relocating its headquarters to Cheongna, Incheon, in September. All five major banks, including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, attended a briefing held on August 13.
In Gyeongbuk, KB Kookmin Bank has thrown down the gauntlet to challenge the existing power structure. During the treasury proposal submission period from August 12 to 13, KB Kookmin participated for the first time, alongside the current treasury operators, Nonghyup Bank and iM Bank. The Gyeongbuk treasury, which manages an annual budget of 15 trillion won, has been held by Nonghyup Bank and iM Bank since the introduction of public competition in 2007.
Competition for the Jeonnam-Gwangju treasury, which is expected to open for bidding next month, is also anticipated to be fierce. The combined annual budget of Jeonnam and Gwangju, including government support funds, is about 25 trillion won, making it the largest among local governments seeking treasury designations in the second half of this year.
In May, a limited competition was held to select an operating institution for the treasury for six months until the end of this year, following the establishment of the special city. This time, a public competition will be held to select a formal treasury that will manage finances for four years starting in 2027. Opportunities for participation have opened up not only for the current first treasury, Nonghyup Bank, and the second treasury, Gwangju Bank, but also for major commercial banks.
Interest rate competition is expected to be a significant factor. Jeonnam-Gwangju established treasury designation and operation regulations last month, increasing the scoring for interest rates on demand deposits from 3 points to 8 points. This change has heightened the impact of a bank's financial strength and interest rate conditions on treasury selection.
Banks are pursuing local treasury contracts not only to manage local government revenues and expenditures but also to expand transactions with public officials, affiliated organizations, and local businesses. The symbolic value of being a representative bank in the region and securing a foothold for local operations are also seen as attractive factors.
A financial sector official stated, “In the past, local treasuries were strongly influenced by Nonghyup Bank and local banks, but recently, major commercial banks have shown active interest. As securing a foothold for local operations becomes more critical, competition for treasury contracts will intensify.”
* This article has been translated by AI.
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