39 Bank Branches Closed This Year Alone... "About 100 More to Close in the Second Half" (Comprehensive)

7 Major Commercial Banks Accelerate Mergers Amid Digital and Non-Face-to-Face Expansion
207 Mergers in the Past Year... Eliminating Inefficient Branches to Reduce Costs

[Asia Economy Reporter Kwangho Lee] The consolidation and closure of bank branches are accelerating. Over the past year, more than 200 bank branches have closed. This year alone, about 30 branches have disappeared. Although financial authorities have ordered a 'speed adjustment' along with strengthening the branch closure procedures, banks appear to be accelerating the reorganization of their offline operations to facilitate digital transformation. In particular, with about one hundred branch closures scheduled for the second half of the year, the number of branches closing this year is expected to reach an all-time high.

According to the financial sector on the 8th, from January to May this year, seven banks including KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, SC First, and Citibank closed a total of 39 branches. As of May last year, the number of branches that disappeared over one year reached 207.

This is interpreted as the result of the expansion of non-face-to-face services due to the impact of COVID-19, which accelerated the closure of inefficient offline branches.

KB Kookmin Bank Shows Largest Decrease... 27 Branches to Withdraw in July

Among the banks, KB Kookmin Bank, which has the largest number of branches, showed the largest decrease. The number of branches, which was 1,018 in May last year, decreased by 64 to 954 as of the end of last month. During the same period, Hana and Woori Banks closed 47 and 44 branches respectively, while Shinhan (21), SC First (16), Nonghyup (11), and Citibank (4) also withdrew one after another.

Branch closures are expected to accelerate further in the second half of the year. KB Kookmin Bank plans to close 27 branches in July, including the Yeoksam-dong Comprehensive Financial Center and Jeju Comprehensive Financial Center, and 2 branches in September, including the Guri Comprehensive Financial Center and Namdaemun Comprehensive Financial Center. Woori Bank plans to consolidate 2 branches in June and 19 in July, Shinhan Bank will close 17 branches in September, and Nonghyup Bank will close 3 branches in August. SC First Bank will close two branches, Chungju and Guro-dong, at the end of June.

The reason banks are driving branch reductions is due to a significant decrease in financial consumers visiting branches after the COVID-19 pandemic and the operating costs involved. Maintaining a branch located in the downtown area of major cities costs about 1.2 to 1.7 billion KRW per year. It is interpreted as an intention to reduce various costs by eliminating inefficient branches that customers do not visit due to non-face-to-face services.

A representative from a commercial bank said, "Branch consolidation is for the efficient operation of branches," and added, "We will promote the establishment of complex branches to help financial consumers' convenience." Another official explained, "As competition with internet-only banks intensifies, branch reductions, which inevitably incur fixed costs, are expected to continue for some time," and "With non-face-to-face channels becoming central, the online sales ratio of major commercial banks has exceeded 70%."

In fact, it was found that 7 out of 10 customers subscribing to financial products such as loans and deposits at major banks used online channels. As of April, the online sales ratio of loan products at Hana Bank reached 88%. Industrial Bank of Korea, whose main customers are small and medium-sized enterprises, also had a high online subscription ratio of 82.2%, and Shinhan Bank showed that 60% of customers subscribed to products online.

Financial Authorities Order 'Speed Adjustment'... Strengthening Closure Procedures

Meanwhile, financial authorities have been implementing a 'joint procedure related to bank branch closures' since March to prevent financial vulnerable groups from suffering damage due to branch reductions.

According to the procedure, before closing a branch, banks must analyze the distribution of customers by age group and financial vulnerability, the location of other banks in the area, and the suitability of alternative means. Consumer protection departments and external experts participate in the evaluation process. If the evaluation determines that the need to protect financially vulnerable groups is considerably high, maintaining the branch or converting it to a business office is given priority.

Once a branch closure is decided, the bank must notify customers at least twice at least three months in advance. However, this procedure is not required if it is a temporary closure or a merger with a nearby branch.

A financial authority official emphasized, "We will strive to minimize customer inconvenience caused by bank branch closures and protect the financial accessibility of financially vulnerable groups."

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