Financial authorities to push for DGB's conversion into commercial bank in Q1

Headquarters of DGB Daegu Bank in Daegu / Yonhap

Financial authorities are making efforts to convert DGB Daegu Bank, a regional lender based in Daegu, into a commercial bank by the first quarter of 2024 at the earliest.

According to industry sources on Monday, the Financial Services Commission plans to proceed with a legal interpretation of the current Banking Act, in order to convert DGB Daegu Bank into a commercial bank by the first quarter of 2024.

Once the financial authorities complete their legislative interpretation, the process of transforming DGB Daegu Bank into a commercial bank is likely to be accelerated.

The original goal for the financial authorities and the bank was to complete the conversion last year. However, the timeline was delayed as the bank was investigated by the Financial Supervisory Services, due to allegations of accounts being opened illegally by its employees.

The current law only outlines the procedure to obtain a banking license but lacks specific clauses for cases involving the conversion of regional banks into commercial ones. There will also be changes regarding when a regional bank transitions to a commercial bank, such as in the scope of business and capital requirements. However, the law does not provide standards for the approval of such transitions.

Financial authorities have advocated for this transition to foster greater competition in the banking industry. To address this regulatory challenge, several methods have been discussed since last July. These include DGB returning its original license and applying for a new one, or using the existing license with revised authorization conditions. It is reported that financial authorities are favoring the latter approach.

DGB Daegu Bank said it has formed a task force specialized in conversion procedures and communicating with the financial authorities.

"The year 2024 is expected to be a historic one, filled with unprecedented hope and anticipation, as it marks the year that Daegu Bank will transition into a commercial bank," DGB Financial Group Chairman Kim Tae-oh said last week during a kick-off meeting for 2024.