The government will disclose local government treasury contracted interest rates as early as December. The move follows criticism that treasury contracted interest rates vary widely by local government and that the basis for setting rates is unclear. It was found that treasury interest rates for metropolitan governments can differ by up to 1.2 percentage points at the same bank.
According to the financial sector on the 22nd, the government is pushing to revise the Enforcement Decree of the Local Accounting Act to disclose the contracted interest rates of local government treasuries. Local governments nationwide select treasury banks to hold their budgets and public funds, and the treasury banks pay interest on these funds to the local governments.
Local governments and banks are not disclosing the exact interest rates. As a result, critics said treasury interest rates differ widely by local government and taxes are being poorly managed. President Lee Jae-myung, at a frugality in national finance meeting in August, ordered, "Review whether we can conduct a full survey of local governments' treasury selection and interest rate issues and make them public," and the government drew up follow-up measures. The plan to disclose treasury interest rates is expected to take effect as early as December. The government plans to survey each local government's treasury interest rate and disclose the results soon.
At the meeting, there was also criticism that NongHyup Bank monopolizes about 70% of local government treasuries nationwide. In response, NongHyup Bank said, "For small and mid-sized local governments, treasury profitability is low, and there are many cases where no banks participate in bidding," adding, "For such local governments, NongHyup Bank takes on the treasury as part of social contribution."
However, industry officials say it is a problem that interest rates differ from one local government treasury to another. According to data that Democratic Party of Korea lawmaker Yoon Jun-byeong received from NongHyup Bank, as of last year the contracted interest rates for metropolitan government treasuries handled by NongHyup Bank differed by up to 1.2 percentage points. The place receiving the highest rate was Gwangju, at an average of 3.32%. The lowest was Sejong Special Self-Governing City, at 2.13%. In addition, Ulsan (2.43%), South Chungcheong and North Gyeongsang (2.37%), and Incheon (2.34%) were also receiving low interest.
A commercial bank official said, "It is important to receive a lot of treasury interest, but the cost of overhauling existing systems, resident convenience, and community contribution are also important evaluation items," adding, "If you select a bank with a high interest rate as the treasury, you cannot ignore the ancillary expenses that arise elsewhere."