Strengthened Store Closure Procedures... Banks Say "Pace Won't Change"

Enforcement of Revised 'Joint Procedures for Bank Branch Closures' Starting March 1

[Asia Economy Reporter Park Sun-mi] To minimize the side effects of bank branch closures, the revised "Joint Procedures Related to Bank Branch Closures" will be implemented from next month, but doubts about its effectiveness are already being raised. Since banks select experts and host the evaluation, even though an external expert must participate in the preliminary impact assessment and report to the financial authorities, concerns have emerged that independence may be compromised. The industry expects that even if the joint procedures are implemented amid a surge in non-face-to-face transactions, it will be difficult to slow down the pace of branch closures.

According to the financial sector on the 10th, major domestic banks evaluate that the revised joint procedures, effective from March 1, are not significantly different from those voluntarily established by the banking sector in June 2019. Banks already conduct internal analyses and impact assessments on the effects on customers and the availability of alternative means before closing branches. They have also been notifying related consolidation and closure information in advance on their websites and branch bulletin boards. The changes from the existing joint procedures are the timing of notification regarding branch closures (from 1 month to 3 months in the revision) and the participation of the bank’s consumer protection department and external experts in the preliminary impact assessment process to strengthen the independence and objectivity of the evaluation. Banks maintain that this is not a significant obstacle to reconsidering branch closure decisions.

A bank official said, "Since banks already conduct impact assessments before closing branches, the trend of closing inefficient branches will not change even after the revised joint procedures are implemented," adding, "The reduction in the number of branches is an unavoidable reality as non-face-to-face transactions increase."

Another bank official explained, "Notifying branch closure information 3 months in advance and operating alternatives such as ATMs are not particularly difficult," adding, "The key issue is how objectively the inconvenience to financially vulnerable groups is evaluated in the preliminary impact assessment related to branch closures." The official further noted, "However, since the bank hosts the evaluation and selects the external experts participating in the process to strengthen independence and objectivity, there are doubts about how effective it will be."

Banking Sector "Ready to Comply... Selecting External Experts"
Effectiveness Will Depend on Financial Authorities' Monitoring

Since there are no special revisions, the banking sector has mostly completed preparations to implement the revised "Joint Procedures." Shinhan Bank, which announced the consolidation of Samseongyo Branch and Hyehwa-ro Branch into Daehak-ro Branch effective February 29, stated that it conducted internal analysis and impact assessment on the effects on customers and the availability of alternatives for the branch closure. Other banks such as Kookmin and Woori are also preparing to implement the revised joint procedures from March without difficulty and are currently in the process of selecting external experts to participate in the preliminary impact assessment.

There are also calls for the financial authorities to strengthen monitoring and management intensity for the revised "Joint Procedures" to effectively protect financially vulnerable groups affected by bank branch closures. Since the revised joint procedures are voluntary regulations, their effectiveness may vary depending on how the authorities enforce them.

Currently, the Financial Supervisory Service (FSS) is in the process of improving the "Enforcement Rules of the Banking Supervision Regulations" to enable banks to attach preliminary impact assessment results of closed branches to quarterly business reports and strengthen disclosure of branch operation status to monitor compliance with branch closure procedures. An FSS official said, "The rule improvement is already decided and only awaits final approval," adding, "The rules will be improved and applied within the first quarter, and the operation status of branches and sub-branches (new openings, closures, etc.) will be analyzed and regularly announced externally."

Meanwhile, the number of bank branches disappearing is steadily increasing due to the rise 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 domestic bank branches has been continuously decreasing from 7,281 in 2015 to 7,101 in 2017, 6,709 in 2019, and 6,406 in 2020. Last year, 303 bank branches were closed.

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