The corporate loan market is rapidly expanding, prompting banks to accelerate the enhancement of their corporate finance infrastructure. This shift goes beyond merely increasing loan volumes; banks are streamlining loan execution processes and refining credit risk management systems. The focus of corporate finance competition is shifting towards operational efficiency and data utilization, with banks integrating corporate accounting and cash management tasks into their systems and leveraging artificial intelligence (AI).
According to the financial sector on October 21, Hana Bank has initiated the selection of contractors for projects aimed at improving the 'multiple corporate loan execution process' and the 'calculation and estimation system for loss given default (LGD).' This effort seeks to reduce repetitive tasks in the corporate loan execution process and to measure expected losses from loan defaults more accurately. It reflects a strategy to enhance both operational efficiency and risk management capabilities in response to the growing volume of loans.
The urgency for banks to upgrade their corporate finance infrastructure is driven by a sharp increase in corporate loans. As of the end of September, the combined corporate loan balance of the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at 886.48 trillion won, an increase of approximately 41.8 trillion won compared to the end of last year. In September alone, loans rose by 8.95 trillion won, marking the largest monthly increase in two years and five months. With ongoing regulations on household loans, corporate finance has emerged as a key growth driver for banks, underscoring the importance of supporting systems.
Automating loan processing has become a major focus. Corporate loans involve multiple steps from assessment to approval and execution, which increases the workload as the volume grows. Consequently, banks are pursuing strategies to reduce repetitive tasks and shorten the time required for assessment and execution by utilizing AI.
Woori Bank is redesigning about 20 of the approximately 50 steps involved in corporate loan processing to be AI-driven. The goal is to reduce annual work hours by approximately 50,000 by having AI assist with information retrieval, data verification, and preparation of assessment materials.
Improvements in corporate finance infrastructure are also expanding to the utilization of corporate management data. Banks are broadening their service scope beyond account transactions to encompass overall corporate management activities, including accounting and cash management, thereby strengthening their ability to assess cash flow and funding needs.
KB Kookmin Bank is working on integrating enterprise resource planning (ERP) functions into corporate banking as part of its core banking modernization phase two project. This initiative combines automated ledgers and cash management functions with existing account inquiry and transfer services, linking financial transactions with accounting information. The aim is to enhance convenience for corporate clients while establishing a foundation for tailored financial services based on transaction data.
A financial sector official stated, "For banks, the importance of infrastructure improvements will grow as they seek to reduce loan processing costs while expanding touchpoints with corporate clients and preparing for default risks."
* This article has been translated by AI.
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