Last Year, 303 Bank Branches Closed... "From March, Impact Assessment Required Before Closure Decision"

303 Bank Branches Closed Last Year
Revised 'Joint Procedures for Bank Branch Closures' to Take Effect from March 1

[Asia Economy Reporter Park Sun-mi] The revised "Joint Procedures Related to Bank Branch Closures" will be fully implemented starting next month on the 1st. Before deciding to close a branch, banks must conduct internal analysis and impact assessments regarding the effects on customers and the availability of alternative means. If the assessment determines that the need to protect financially vulnerable groups is significantly high, branch closure will not be permitted.

On the 9th, the Financial Supervisory Service (FSS) and the Korea Federation of Banks announced that they are actively promoting the strengthening of market discipline, such as improving prior procedures for bank branch closures and expanding disclosure on branch operation status, to prevent deterioration in consumers' access to and convenience of financial services due to the reduction of bank branches.

Due to the increase in non-face-to-face transactions such as internet and mobile banking amid COVID-19 and the expansion of redundant branch consolidation, the number of bank branches (branches + sub-branches) continues to decline. Last year, 303 bank branches were closed. As a result, the number of domestic bank branches has steadily decreased from 7,281 in 2015 to 7,101 in 2017, 6,709 in 2019, and 6,406 in 2020.

While the reduction of offline networks is an inevitable trend in the process of restructuring financial transaction environments based on online platforms, there are concerns that the decrease in branches will exacerbate inconveniences for financial consumers, especially digitally vulnerable groups such as the elderly. Furthermore, in non-metropolitan areas (outside the Seoul metropolitan area and major cities) where overall financial infrastructure is relatively limited, branch closures could have a significant impact.

To minimize consumer inconvenience, the revised "Joint Procedures Related to Bank Branch Closures" will be implemented from March 1.

Banks must conduct a prior impact assessment before deciding to close a branch. If the assessment finds that consumer inconvenience is significant, banks should prioritize maintaining the branch or converting it into a sub-branch. Consumer protection departments within banks and external experts will participate in the impact assessment process to enhance its independence and objectivity.

Additionally, as alternatives to branch closures, banks will explore various options beyond existing ATM operations and counter service partnerships with other financial institutions, such as regular mobile branches (e.g., once a week), small-scale branches (1-2 staff members), and STM (high-function unmanned automated machines). Furthermore, notifications to customers will be strengthened by requiring at least two notices starting a minimum of three months before the branch closure date (currently one month prior).

The FSS plans to improve the "Enforcement Rules of the Banking Supervision Regulations" to require banks to attach prior impact assessment results of closed branches in their quarterly business reports to monitor compliance with branch closure procedures.

Market discipline will also be strengthened through disclosure of branch operation status. The FSS will revise bank management disclosure items to require annual disclosure of detailed information related to branch openings and closures in addition to the number of branches. This will also be included in the amendment to the "Enforcement Rules of the Banking Supervision Regulations."

The FSS stated, "The submission of prior impact assessment results and enhanced disclosure of branch operation status will be implemented immediately upon the amendment of the enforcement rules in the first quarter of this year. Additionally, starting this year, the FSS plans to regularly analyze and publicly announce the operation status of branches and sub-branches (openings, closures, etc.) by bank."

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