South Korean regulators are planning to strengthen regulations and introduce incentives to enhance the competitiveness of regional banks.
The country has proposed revising how banks calculate their loan-to-deposit ratios, a move designed to encourage greater lending to companies and small business owners outside the Seoul metropolitan area. The Financial Services Commission (FSC) said in an announcement earlier this month that the proposal will remain open for public consultation until 11 February 2026, after which it will undergo an approval process and is expected to take effect in the first quarter of 2026.
In addition to the rule change, the FSC outlined broader plans to upgrade regulatory frameworks and offer incentives to improve regional banks’ market position. Regulators also intend to strengthen the role of savings banks and mutual finance institutions in supporting local financing.
The measures form part of a wider policy push to increase funding for regional economies. The share of policy funds allocated to areas outside the Seoul region will rise to 45% by 2028, up from 40% in 2025. This increase is projected to lift annual policy funding for regional economies by KRW25 trillion, bringing the total to KRW120 trillion by 2028.
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