[Column] The Financial Supervisory Service Urges Not to Close Stores in the Untact Era

[Asia Economy Reporter Kangwook Cho] "It is simply a 'contradiction (矛盾)' to emphasize digital transformation policy-wise while telling us to keep existing branches as they are."

On the 21st, when Yoon Seokheon, Governor of the Financial Supervisory Service, issued guidelines to refrain from reducing bank branches, a senior executive of a commercial bank expressed dissatisfaction with this remark. Governor Yoon publicly warned through an executive meeting that "it is not desirable for banks to drastically reduce branches in a short period." This was due to concerns that it could cause inconvenience in financial service usage for financial consumers, especially the digitally vulnerable groups such as the elderly.

In fact, over the past few years, the banking sector has steadily reduced branches. In particular, the four major commercial banks closed 126 branches this year (as of July 16), exceeding last year's figure of 88. However, this is not simply due to the spread of non-face-to-face transactions such as internet and mobile banking, as Governor Yoon mentioned. The major factor should be seen as the completely changed situation of banks after the COVID-19 pandemic.

The 'record-breaking' performance of the banking sector until last year has already ended. The sector has entered a full-fledged 'cold wave' due to intensified competition from big tech companies like Naver and Kakao entering the financial industry, contraction of the private equity fund market, and large-scale financial support due to the COVID-19 pandemic. Since COVID-19, the amount newly borrowed by corporations and households from banks has exceeded 100 trillion won. Profitability has deteriorated due to low interest rates, and the number of customers visiting bank branches has sharply shrunk. Additionally, the financial authorities' demand for loan loss provisions has also played a role. Banks have no choice but to secure funds by closing branches and selling assets.

The financial authorities have emphasized the transition to a digital economy as a policy. Beyond the situation until last year where fintech advancements empowered non-face-to-face channels such as mobile banking, the COVID-19 pandemic has made the 'untact' environment a daily reality. It is not just a 'change' but a 'transformation.'

Governor Yoon said not to use COVID-19 as an excuse. In a situation where no one has traveled a new path due to the COVID-19 pandemic, telling people not to use it as an excuse may contradict the three major principles of the 'FSS Open Culture Project' he emphasized: 'de-authoritarianism, communication, and empathy.' At the very least, if there is an attempt to communicate, there should also be a willingness to consider alternatives together.

This content was produced with the assistance of AI translation services.