National Assembly Inquiry, Recent Study on Bank Branch Reduction
Branches Decreased from 7,281 in 2015 to 6,183 This Year
"Neglecting Financial Exclusion Leads to Social Issues"
Criticism That Financial Authorities' Measures Are "Limited"
Amid growing concerns that the rapid reduction of bank branches due to digital innovation and other factors could restrict the financial activities of marginalized groups, financial authorities have been criticized for not presenting clear alternatives or implementation plans.
On the 9th, according to sources in the financial and political sectors, the National Assembly Research Service recently pointed this out in its report titled "Challenges for Bank Branch Reduction and Protection of Financially Marginalized Groups." Legislative Research Officer Lee Gu-hyung stated in the report, "If the financial exclusion caused by branch reduction is left unaddressed, some users may be excluded from financial services, leading to social problems, which should be considered in policy-making," and criticized that "the policies announced by financial authorities do not present clear alternatives or concrete implementation plans."
Lee also advised, "The measures announced by each bank appear to be implemented without a solid cooperative system or unified direction," emphasizing the need for financial authorities and the industry to seek effective alternatives under the goal of minimizing financial exclusion.
The fact that even the National Assembly Research Service, which investigates and analyzes all areas of national affairs, mentioned branch reduction and the lack of roles by financial authorities is because the 'downsizing' of banks through branch consolidation has accelerated in recent years. The number of branches owned by domestic commercial banks, regional banks, and other specialized banks decreased by 955 from 7,281 at the end of 2015 to 6,326 as of the first half of this year. It is expected to shrink further to 6,183 in the second half of this year.
Banks Are Closing Branches, but Policy Effects Are Limited
Branch reduction has been led by large commercial banks with significant asset sizes. In the past six years, 822 branches have disappeared from commercial banks, far exceeding the 90 branches of regional banks and 47 of specialized banks. In particular, the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?which must compete with Big Tech and Fintech companies, plan to continue downsizing. These banks are reportedly planning to consolidate about 70 branches in January next year alone.
This trend leads to a decrease in cash and deposit/withdrawal channels, which could cause inconvenience to cash users and the elderly, according to the Research Service's analysis. There are concerns that it could hinder financial accessibility for certain groups struggling with online financial transactions or residents in areas lacking financial infrastructure. The 'comprehensive level' of the elderly, farmers and fishermen, and people with disabilities is lower compared to other groups, and some elderly individuals reportedly find non-face-to-face transactions inconvenient due to complicated terminology and complex screen layouts.
The legislative research officer pointed out limitations in policies aimed at preventing side effects. The "Joint Procedures Related to Bank Branch Closures," implemented last year, requires banks to conduct impact assessments before closing branches and to provide alternative means. However, since detailed standards are autonomously set by banks and consultations or joint responses among banks are not mandatory, there are opinions that significant loopholes exist. Discussions on the establishment of "joint branches" are also stagnant. Joint branches refer to a branch operation system where multiple banks provide financial services in a single space. Issues to be resolved include unclear responsibility for branch management, difficulties in appropriate responses in case of customer information leaks, overheated competition, and disclosure of business strategies.
The legislative research officer advised, "More fundamentally, considering changes in the financial environment, transaction methods designed to be easily used by the elderly and people with disabilities should be provided, along with appropriate financial education," adding, "Examples include building elderly- and disability-friendly user interfaces (UI) and strengthening customized services for different user groups."
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