Korea's financial regulators step in as banks close branches

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Korea's financial regulators step in as banks close branches

 
A notice posted in a KB branch in Gangdong District, eastern Seoul, on January 2022 informs customers on the plan to merge with another KB branch nearby. [YONHAP]

A notice posted in a KB branch in Gangdong District, eastern Seoul, on January 2022 informs customers on the plan to merge with another KB branch nearby. [YONHAP]

 
With banks continuing to reduce their branch offices, Korea's financial regulators are stepping in to reverse the trend.
 
"Banks must be aware of the public role they perform and function as a medium for finance even as they pursue profits," Financial Supervisory Service chief Lee Bok-hyun said Monday.
 
Raising the hurdle for banks to close down branch offices is on the FSS's agenda this year.
 
The plan is to make the current process, which involves submitting a preliminary impact assessment result to the financial regulator and notifying customers at least three months prior to closure, even tougher.
 
This comes as financial authorities raise concerns that the digitally vulnerable, including elderly people unaccustomed to online banking, may grow financially isolated if banks cut face-to-face financial services too quickly.
 
“There are cases where banks ignore their public role through behavior that limits the financial accessibility of low-income and elderly people, such as delaying the normalization of operation hours and continuing branch closures,” Lee said.
 
Banks are disappearing from the streets.
 
Some 17 major banks operated 7,158 branches in 2015. That number dropped to 6,791 in 2017 and 5,858 in 2022.
 
Banks complain that attempting to regulate branch closures when branches must inevitably be reduced would run counter to the rapidly changing financial environment.
 
"Considering the quick domestic transition to digital finance due to the development of IT, we can't say the number of bank branches has fallen rapidly," an anonymous individual from the banking industry told the JoongAng Ilbo.
 
"When non-face-to-face bank services have become commonplace, considering profits alone, there's no reason for commercial banks to maintain the current level of branches while paying expensive rents." 
 
An employee of another commercial bank said, "It's wrong to force only commercial banks to maintain branches when there are now internet banks without a single branch."
 
For sure, demand for offline banking is still out there. When Covid-19 was at its peak in 2021 and bank hours were shortened by an hour, customers had to wait in queues for 30 minutes instead of five.  
 
To provide for financially isolated groups, banks suggest opening joint branches with other banks and opening specialized branches in convenience stores.
 
Financial authorities are also looking for ways to encourage more banks to set up joint branches or operate mobile branches that move around in a truck.
 
Creating elderly-friendly banking apps is another alternative. 
 
"The number of offline branches is declining globally as finance becomes more digitized," the National Assembly Research Service said in a report released on January 2022. "The trend is inevitable, but efforts to alleviate the entailing inconvenience are necessary as well."

BY HA NAM-HYUN, SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]
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