Despite Government Call to Minimize Cooperation Funds, Commercial Banks’ Local Treasury Race Heats Up... Shinhan Accounts for 43%

Results lag investment: 42.8% share of cooperation funds, but just 12.7% market share
Regional powerhouse NH NongHyup holds 70.3% market share with just 20.7% of cooperation funds
Song Okju of the Democratic Party: "Ease excessive competition... Do not exclude local mutual finance institutions"

The government recommended that banks minimize the share of cooperation funds in their bids to prevent excessive competition in the public treasury market for local governments and education offices. However, major commercial banks have increased their spending, raising concerns that local mutual finance institutions are being shut out of the market. Shinhan Bank, in particular, accounted for more than 40% of all bank cooperation funds, yet failed to catch up with NH NongHyup Bank, the market leader in this field.

Yonhap News

According to data on local government and education office treasuries submitted by 12 banks (KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, IBK, BNK Busan, BNK Kyongnam, iM, Jeonbuk, Gwangju and Jeju) to Song Ok-ju of the Democratic Party of Korea, a member of the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, the combined size of local treasuries for local governments and education offices stood at 545 trillion won in 2024, 612 trillion won in 2025 and 685 trillion won in 2026, as of the end of September. Local government treasuries grew from 457 trillion won to 506 trillion won and then to 592 trillion won, while education office treasuries stood at 88 trillion won, 105 trillion won and 93 trillion won, respectively. In 2026, following the administrative integration of South Jeolla Province and Gwangju, the number of metropolitan and provincial education offices fell from 17 to 16. NH NongHyup Bank serves 15 of them, and Busan Bank serves one.

According to Song, the Anti-Corruption and Civil Rights Commission called in April 2024 for the share of cooperation funds in treasury evaluation criteria to be minimized and for cooperation funds and agreement details to be disclosed, in an effort to curb excessive competition. However, competition among banks over cooperation fund spending has continued unabated. Banks’ cooperation fund spending rose from 305 billion won in 2023 to 315.6 billion won in 2024 and 349.8 billion won in 2025.

The cumulative amount of cooperation funds actually paid during contract periods totaled 675 billion won in 2024, 824.3 billion won in 2025 and 1.0868 trillion won in 2026, a 61% increase in two years. Over the same period, Shinhan Bank’s share of total bank cooperation funds increased from 34.7% to 42.8%, Hana Bank’s rose from 2.7% to 9.8%, and Woori Bank’s climbed from 9.0% to 11.2%. By contrast, NH NongHyup Bank’s share fell from 32.9% to 20.7%.

In terms of amounts, Shinhan Bank’s payments doubled from 234.5 billion won to 464.7 billion won. Hana Bank’s rose 5.8-fold, from 18.2 billion won to 105.9 billion won, while Woori Bank’s doubled from 60.7 billion won to 121.4 billion won. NH NongHyup Bank’s payments remained nearly unchanged, edging up from 222.3 billion won to 224.8 billion won.

According to Song, banks offered a total of 1.4141 trillion won in cooperation funds in 2026 treasury bids, and 77% of that amount had been paid by the end of September. Shinhan Bank had paid 98.5% of the 471.6 billion won it offered, while NH NongHyup Bank had paid 50.2% of its 447.8 billion won offer.

Competition among commercial banks over cooperation funds has intensified, but the gap in market share has not narrowed. In other words, the results have been limited relative to the amounts invested. Comparing local treasury market shares in 2024 with those from January to September 2026, NH NongHyup Bank’s share rose 3.9 percentage points, from 66.4% to 70.3%, while Shinhan Bank’s fell 2.1 percentage points, from 14.8% to 12.7%. Hana Bank’s share rose from 1.9% to 5.8%, making it the third-largest player, while iM Bank’s (3.6% to 3.0%), Busan Bank’s (3.8% to 2.9%) and KB Kookmin Bank’s (2.8% to 1.5%) shares declined.

Looking only at local government treasuries, NH NongHyup Bank’s share rose 5.2 percentage points, from 61.4% to 66.6%, while Shinhan Bank’s fell 2.9 percentage points, from 17.6% to 14.7%.

Song calculated the “cooperation fund burden relative to treasury market share” by dividing each bank’s share of cooperation funds by its treasury market share. By this measure, Shinhan Bank’s ratio rose from 2.4 in 2024 to 3.4 in 2026, while NH NongHyup Bank’s fell from 0.5 to 0.3. In 2026, KB Kookmin Bank and IBK had ratios of 4.3 and 2.8, respectively, while Hana Bank’s was 1.7, indicating that they paid more in cooperation funds relative to their market shares. iM Bank (0.9), BNK Busan Bank (0.8) and Gwangju Bank (0.8) were below 1. A figure above 1 can be interpreted as indicating lower efficiency relative to the investment.

In 2026, 93 local government treasury contracts are set to expire. They represent approximately 207 trillion won in total treasury funds, and banks have offered 803.8 billion won in cooperation funds. Shinhan Bank offered 460.7 billion won (57.3%), and Woori Bank offered 121.4 billion won (15.1%).

Song said that local mutual finance institutions, which contribute substantially to regional economies, are being shut out of the local government and education office treasury market. According to Song, financial authorities have included savings banks in the “regional reinvestment assessment,” which serves as a guideline for selecting treasury banks, but have excluded local agricultural cooperatives, fisheries cooperatives, forestry cooperatives, Saemaul Geumgo and credit unions.

“Cooperation fund spending appears to have risen sharply as commercial banks such as Shinhan and Hana have pursued aggressive strategies to enter the treasury market,” Song said. “The system needs to be improved so that local financial institutions, including mutual finance institutions, can work with commercial banks.”

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