700 Bank Branches Closed in 5 Years... Authorities Say "Consumer Protection" VS Banks Say "No Customers" (Comprehensive)

Concerns Over Financial Service Exclusion for Elderly
FSS Delays Branch Closures
Commercial Banks Say "Non-Face-to-Face Transactions Are the Trend"

[Asia Economy Reporter Kangwook Cho] It has been revealed that the number of branches operated by domestic banks has decreased by about 700 over the past five years. This is due to the spread of non-face-to-face transactions such as internet and mobile banking amid a super-low interest rate environment, where banks' net interest margin (NIM) is on a downward trend. The impact of the novel coronavirus disease (COVID-19) is expected to further accelerate this trend. However, as financial authorities are imposing restrictions beyond recommended levels, signs of renewed conflicts with the banking sector are emerging.

External Expert Review Required for Bank Branch Closures...Concerns Over Political Interests Involvement

According to the financial sector on the 12th, the Financial Supervisory Service (FSS) plans to revise the current banking sector's voluntary regulation, the 'Joint Procedure on Bank Branch Closures,' as early as the end of this year. The revision aims to require the participation of external experts in reviewing branch closures and to notify financial consumers three months prior to the closure. The banking sector is concerned that if political interests become involved, banks' decision-making could be swayed by outsiders.

An FSS official explained, "We are currently working on revising the joint procedure related to bank branch closures and will announce it once finalized," adding, "As the pace of branch closures accelerates due to digital transformation, the exclusion of the elderly is becoming more severe."

Bank Branches Decreased by About 700 in 5 Years...Reduction Speed Gradually Accelerating

According to the FSS, as of the end of June this year, the number of domestic bank branches stood at 6,592. Compared to the end of 2015 (7,281 branches), this represents a 9.5% (689 branches) decrease. During this period, commercial banks closed 629 branches, accounting for 91.3% of all closures. Regionally, closures in metropolitan areas such as the Seoul Capital Area and major cities accounted for 89% of the total, rather than in vulnerable areas like rural farming and fishing villages.

The financial authorities are concerned that the pace of branch reductions is gradually accelerating. This is because the rapid decrease in branch numbers could make it difficult for the elderly to use banking services. Up to the first half of this year, 117 branches have been closed. Additionally, about 40 branches and sub-branches of KB Kookmin, Shinhan, Woori, Hana, and SC Jeil Banks are scheduled to close this month. This means that over 150 branches have disappeared annually over the past five years.

Concerns Over Insolvency Due to COVID-19...Cannot Ignore Deterioration of Management

However, the banking sector acknowledges these points but argues that it is an "unavoidable reality." They face a situation worrying about insolvency beyond a '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.

An official from a commercial bank said, "In a situation where bank profits are rapidly decreasing, keeping branches where customers do not visit only means neglecting the deterioration of management," adding, "With financial authorities demanding COVID financial support and even deferring interest repayments again, we have no choice but to close branches and sell assets to secure funds."

Need for Joint Response Through Banking Sector Consultation, Including Draft Method Introduction

Experts point out that the reduction of bank branches should be interpreted as a survival strategy to respond to changing times. However, from the perspective of inclusive finance, they recommend joint responses through banking sector consultations, such as introducing a 'draft method for branch closure procedures.'

The draft method is a plan where each bank sequentially decides on the areas to close branches, similar to how rookie players are selected in professional sports.

Additionally, overseas, after COVID-19, countries like Belgium, Japan, and Germany are actively exploring joint operation of branches not only among medium-sized banks but also large banks. Accordingly, it is explained that joint operation of ATMs and bank branches among banks would be highly effective in terms of improving customer convenience and reducing costs.

Lee Daegi, Senior Researcher at the Korea Institute of Finance, said, "The reduction of bank branches and the resulting workforce restructuring are part of banks' survival strategies to respond to the era of prolonged low growth and low interest rates and rapid digitalization," adding, "If maintaining an appropriate number of branches is necessary, it is possible to consider introducing a draft method for branch closure procedures through banking sector consultations, as well as joint branch operations and bank agency systems."

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