The selection process for the city treasury in Andong, Gyeongbuk, the hometown of President Lee Jae-myung, is drawing attention from the financial sector in various ways. President Lee recently instructed at a meeting to conduct a 'comprehensive investigation' on the selection of municipal treasuries after hearing suggestions regarding the issue.
At the 'National Fiscal Savings Meeting' held on the 13th, chaired by the presidential office, Jeong Chang-soo, director of the National Fiscal Research Institute, pointed out that 'about 70% of municipal treasuries across the country are entrusted to NongHyup, and an analysis based on 2023 shows that the interest rates at high places are 4.7% per year while those at low places are 0.5% per year, indicating a significant gap.'
In response, President Lee instructed, 'Conduct a comprehensive investigation into the selection of municipal treasuries and their interest rates, and organize this information into a table to disclose it to the public.' The financial sector expects that improvements in the selection method of municipal treasuries will emerge following the comprehensive investigation.
Coincidentally, following President Lee's directive that day, Andong City became the first among municipalities to embark on the selection of a new municipal treasury. Andong plans to select a bank to manage the municipal treasury for the next three years within this month starting next year.
The issue raised at the meeting is that the monopoly of NongHyup Bank over the municipal treasury results in some local governments receiving low interest rates. Municipalities select a bank for their municipal treasury to manage budgets and public funds, and the banks pay interest on these funds to the municipalities.
In the case of Andong, NongHyup Bank has managed the municipal treasury since the 1960s. Even after the selection of the treasury changed to competitive bidding, it has never relinquished the top treasury position. The problem is that Andong has the lowest interest rate for municipal treasuries in the country, following Ulleungdo. According to data from last year's National Assembly inspection, the municipalities with the lowest interest rates for municipal treasuries are Gyeongbuk Ulleung-gun and Andong, at 0.03% and 0.09% per year, respectively. The Andong municipal treasury manages a budget of 12 trillion won, yet the annual interest revenue is only 679.25 million won.
In the end, Andong City bears the monopoly of NongHyup over municipal treasuries and the low interest rates. The financial sector predicts that it will not be easy for Andong City to select NongHyup Bank as its municipal treasury given the President's pointed remarks. Currently, the second municipal treasury in Andong is managed by Shinhan Bank.
A financial sector official noted, 'In some small local governments, NongHyup Bank continues to be selected as the municipal treasury out of inertia, considering aspects like accessibility and work efficiency.' He added, 'Many municipalities give higher scores for treasury management abilities, convenience, and other factors than for deposit interest rates or municipal contributions, so it is expected that an improvement plan will emerge this time.'