Under Pressure from Financial Authorities, Banks Surrender... Complete Halt on Closing 'Troublesome Branches'

Financial Supervisory Service Chief Pressures 'Reduction Brake'
Consumer Notified Three Months Before Closure
Impact on Senior-Friendly Financial Measures
Experts Evaluate Branch Closure Effects
Concerns Over Bank Trade Secret Leaks

[Asia Economy Reporter Kim Min-young] Under continuous pressure from financial authorities, commercial banks have finally raised the white flag. The four major banks, which closed as many as 126 branches in the first half of this year, are understood to have abandoned their branch closure plans for the remaining second half. While a significant number of branches were already closed in the first half, coincidentally, the trend of branch reduction came to a sudden halt after the verbal warning issued by Financial Supervisory Service (FSS) Governor Yoon Seok-heon in July.

According to the financial sector on the 1st, the four major banks?Shinhan, KB Kookmin, Hana, and Woori?have revised their branch closure plans for this year. Typically, bank branch consolidation plans are established at the beginning of each year and proceed as planned until the second half. In the banking sector, there were rumors that “after the FSS Governor’s remarks were made public, the branch closure plans were temporarily put on hold.”

Governor Yoon said at an executive meeting on the 21st of last month, “It is not desirable to drastically reduce the number of branches in a short period due to COVID-19.” It is considered unusual for the governor’s remarks to be disclosed at an FSS executive meeting. There was also an interpretation that Governor Yoon personally pressured the banks to prevent misunderstandings during the process of FSS executives and senior officials conveying messages about branch closures to bank representatives.

After this statement, the branch closure work came to a complete stop. Shinhan Bank is known to have no consolidation plans until the end of the year after closing the Incheon Airport IOC branch on July 20. The bank closed five branches including the Gwanghwamun D Tower branch in Seoul in the second half of last year. Hana Bank, which consolidated 50 branches this year and closed 28 in the second half of last year, also stated that there are no closure plans until the end of the year. The last consolidation of this bank this year was the Daechi Station branch on July 13.

KB Kookmin Bank also closed 15 branches at once on July 13, including the Bangbae-dong branch in Seocho-gu, Seoul, the Hwagokbon-dong branch in Gangseo-gu, Seoul, and Suyeong in Busan, but announced that there are no closure plans for the remaining period of this year.

Woori Bank also consolidated the Nakseongdae branch and Nakseongdae Station branch in Gwanak-gu, Seoul, in July and has begun reviewing the remaining branches scheduled for the second half.

The senior-friendly financial environment creation plan jointly announced on the 30th of last month by the Financial Services Commission, the FSS, and the Korea Federation of Banks also appears to have influenced banks’ strategy revisions. According to this plan, financial authorities will involve external experts in the impact assessment process for bank branch closures going forward. Currently, bank employees evaluate the number of customers at the branch, age distribution, alternative means, etc., and then decide whether to close the branch. In addition, the notification period before closure has been extended from 1 month to 3 months so that consumers can be informed earlier when financial companies close branches.

The banking sector expects that branch closures will become more difficult in the future. A bank official said, “There is a possibility of leakage of bank trade secrets such as branch-specific profits and costs during the impact assessment process,” adding, “In a situation where financial authorities have effectively put the brakes on branch closures, no one is likely to take the lead, so branch closures will be suspended for the time being.”

Some argue that financial authorities are excessively interfering with management in a situation where branch closures are inevitable due to the development of non-face-to-face and digital finance. Governor Yoon also acknowledged the necessity of branch reduction, saying, “The reduction of bank branch networks is inevitably a trend due to the spread of non-face-to-face transactions such as internet and mobile banking.” As of March this year, the number of domestic bank branches was 6,652, a decrease of 1,029 branches over eight years since 2012 (7,681 branches).

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