Banks wage a costly bidding war for public treasury contracts as cooperation contributions top 1 trillion won

[Financial News] Banks are engaged in increasingly costly competition to win local government treasury contracts. Contributions banks provide to local governments and other bodies to secure the right to manage public treasuries have surged 61% in two years. Although financial regulators have warned against excessive competition over these contributions, the race to win treasury contracts is growing fiercer, led by commercial banks.

According to data submitted by 12 banks to Song Ok-joo of the Democratic Party of Korea, a member of the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, the banking sector’s cumulative contributions to public treasuries totaled 1.0868 trillion won as of the end of September this year. The amount rose from 675 billion won in 2024 to 824.3 billion won in 2025, before exceeding 1 trillion won this year.
Cooperation contributions are funds banks provide for local community projects and other purposes in return for securing the right to manage treasury accounts for local governments or education offices. Managing a public treasury allows a bank to handle large sums, including local taxes and various government transfers, while also helping it secure stable deposits and expand business with public institutions. That is why banks compete actively for treasury contracts despite the substantial costs involved.
The rise in contributions from commercial banks was particularly pronounced. Shinhan Bank’s contributions increased 98.2%, from 234.5 billion won in 2024 to 464.7 billion won this year. Over the same period, its share of all contributions also grew from 34.7% to 42.8%. That was the largest amount among all banks.
Hana Bank’s contributions surged about 5.8-fold over the same period, from 18.2 billion won to 105.9 billion won. Woori Bank’s more than doubled, from 60.7 billion won to 121.4 billion won.
Meanwhile, Nonghyup Bank managed at least 70% of all public treasuries, while accounting for just 20.7% of the contributions. Despite its lower contribution burden, as of the end of September this year Nonghyup Bank held at least two-thirds of the 685 trillion won in public treasury funds managed by local governments and education offices. Shinhan Bank followed with a 12.7% share, and Hana Bank with 5.8%.
Nonghyup Bank’s contributions increased just 1.1%, from 222.3 billion won in 2024 to 224.8 billion won this year. Its share of total contributions also fell 12.2 percentage points, from 32.9% to 20.7%. This is thought to reflect Nonghyup Bank’s broad reach, based on its nationwide branch network, which enables it to manage treasury accounts in provincial small and midsize cities, including areas facing population decline.
By contrast, Shinhan Bank had just a 12.7% share of public treasuries but accounted for 42.8% of the contribution burden. The ratio of its share of contributions to its share of public treasuries was 3.4 for Shinhan Bank, compared with just 0.3 for Nonghyup Bank. Analysts say commercial banks are offering aggressive terms to secure treasury accounts that are relatively large and profitable.

Competition for treasury contracts at major local governments is also intensifying. Recently, Hana Bank beat Nonghyup Bank to secure the right to manage Sejong City’s primary treasury for the first time in 14 years. The contract covers management of funds worth about 1.9 trillion won for four years starting in 2027. 
Higher spending on cooperation contributions does not necessarily lead to a larger share of public treasuries. Nonghyup Bank’s share rose 3.9 percentage points, from 66.4% in 2024 to 70.3% this year, while Hana Bank’s grew from 1.9% to 5.8% over the same period. Shinhan Bank’s share, by contrast, fell from 14.8% to 12.7%. 
The concern is that an excessive contribution burden during the race to win treasury contracts could hurt banks’ profitability. If the cost of securing a contract grows disproportionately to the income from deposits and transactions generated by a public treasury, the financial benefits of managing it are bound to diminish.
In April 2024, the Anti-Corruption and Civil Rights Commission recommended minimizing the weight given to cooperation contributions in treasury selection evaluations and disclosing the terms of agreements, in order to prevent heated competition driven by financial muscle. However, contributions from the banking sector continued to increase afterward.
Song Ok-joo said, “It appears that spending on cooperation contributions has risen sharply as commercial banks, including Shinhan and Hana, pursue aggressive strategies to enter the treasury market,” adding, “The system needs to be improved so that local financial institutions, including mutual financial institutions, can work with commercial banks.”

[email protected] Seo Ji-yoon Reporter