Banks shuttering branches despite FSS warnings

A man passes by ATMs in Seoul. Korea Times file

By Lee Kyung-min

Major commercial banks plan to reduce the number of branches by at least 100 in the second half of this year, despite recommendations from the Financial Supervisory Service (FSS) against doing so.

The COVID-19 pandemic has prompted more and more customers to handle most of their transactions online, prompting banks to feel increasingly reluctant to spend money on maintaining a large number of offline branches.

But financial authorities appear to be against the rapid closures of a large number of bank branches.

Former FSS head Yoon Suk-heun said last July that it is “not desirable to reduce the number of branches in a short period of time.”

According to FSS data, the number of branches operated by Korea's top five banks ― Shinhan, KB Kookmin, NongHyup, Woori and Hana ― stood at 4,398 as of March, down 191 from a year ago. In contrast, 96 branches were shuttered from March 2019 to March 2020.

After the FSS said it would set up procedural guidelines on branch closures, many lenders hurried to shut down their branches, apparently intending to close branches before they become subject to supervisory measures and possible disciplinary action over compliance issues.

A total of 139 branches disappeared in the second half of last year, seven times more than during the same period of 2019.

A greater number of branches will be shuttered, because online transactions are increasingly preferred by banks to develop and introduce financial products amid growing competition to win more customers.

Up to 80 percent of unsecured loans to individuals and installment savings were sought online by customers during the first half of this year, indicating that most of the key financial services offered by banks are now available through mobile devices.

Shinhan Bank has already shut down 62 branches so far this year, pushing the number of branches to less than 800 across the country.

Woori Bank plans to shutter 23 branches in the second half of this year, while Hana Bank is also expected to shut down seven, with more to be closed soon.

KB Kookmin and NongHyup will take similar steps.

The cost-saving measures, meanwhile, are raising concerns that elderly customers and the underprivileged who are not used to or cannot afford smart technologies are increasingly being left out amid the digitization drive.

Financial authorities have also suggested that unmanned stores should be operated or banks should operate joint branches to solve the problem.

But this is not welcomed by many of them, since it would be difficult to seek accountability in the event of a financial crime including fraud or transaction error made by employees.