Bank Branch Closures Require Alternative Locations... Disclosure Also Expanded

Financial Services Commission Finalizes 'Measures to Streamline Bank Branch Closures'

From now on, banks must secure 'alternative branches' before deciding to close any branch. This measure aims to minimize inconvenience to financial consumers, especially the elderly, caused by branch closures.

The Financial Services Commission announced on the 13th that it finalized the "Measures to Substantiate Bank Branch Closures" during the 5th Working Group Meeting on Banking Operations, Management Practices, and Institutional Improvements, chaired by Vice Chairman Kim So-young at the Government Seoul Office in Jongno-gu, Seoul, the previous day.

The authorities will first enhance the pre-impact assessment related to bank branch closures. Referring to overseas cases, a procedure will be established to collect customer opinions before deciding on branch closures, and based on this, adjustments to alternative measures, re-assessment of impacts, or reconsideration of branch closure decisions must be conducted.

Furthermore, if banks determine through the pre-impact assessment and opinion collection that the impact on financial consumers is significant, they should, in principle, maintain the branch. Even if closure is unavoidable, alternative measures such as small-scale branches, joint branches, counter partnerships with post offices or cooperatives, or mobile branches should be prepared, considering factors like the number of in-branch customers and the proportion of elderly customers.

If consumer inconvenience or damage is minimal, high-function unmanned automated machines (STM) can be used as alternatives. In such cases, guide staff must be assigned or usage training provided. However, unmanned automated machines (ATM) that only handle basic tasks cannot be used as alternatives for branch closures.

The number of external experts participating in the pre-impact assessment will be increased from one to two, with one of them appointed as a local figure. Items related to bank profitability and growth potential will be excluded from the pre-impact assessment, while the focus on minimizing inconvenience to financial consumers will be expanded.

The Financial Services Commission will also expand information disclosure related to branch closures. From now on, when a branch closure is decided, banks must provide customers with basic information such as closure date, reasons, and alternative measures via text message, phone, mail, or email at least three months in advance, along with key contents of the pre-impact assessment, additional available alternatives, and contact information for inquiries after closure.

Additionally, the management disclosure related to branch closures, currently conducted once a year, will be expanded to four times a year. The content will also include not only the number of newly opened and closed branches but also closure dates, reasons, and alternative measures. This information will be disclosed through the Bankers Association Consumer Portal to allow consumers to compare branch opening and closure statuses by bank.

Substantial support related to branch closures will also be strengthened. Banks must establish procedures to retrospectively evaluate the impact of branch closures and provide direct support measures such as preferential interest rates and fee waivers to customers of closing branches to compensate for any inconvenience or damage that may occur in the future. Furthermore, banks should create a separate elderly mode on their websites and applications and conduct practical training using this mode.

The improvement measures established through this substantiation plan will be implemented from the 1st of next month. However, even if branch closures are decided or occur before the 1st of next month, the substantiation measures must be applied except for some items. The management disclosure-related institutional matters will be implemented from the second quarter after revising the Banking Supervision Work Implementation Rules.

Vice Chairman Kim stated, "As the digitalization of finance accelerates, banks are reducing the number of branches from a cost-efficiency perspective, but the inconvenience to financial consumers is increasing due to branch closures." He added, "Since the essence of the financial industry lies in 'trust,' it is only by prioritizing consumer benefit with a long-term perspective over short-term profit-seeking that we can earn the trust of the public."

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