Branch Mergers Within 1 km Also Subject to Closure Procedures...Stricter Standards on Bank Branch Reductions

FSC Chairman Lee Eogwon
Messenger Meeting with Frontline Financial Consumers on the 4th
Bank Branch Closure Response Measures to Be Fully Implemented from March

From now on, even when banks seek to merge or consolidate branches located within 1 km of each other, they will be required to go through a prior impact assessment procedure for branch closures. In addition, if a branch is closed in areas outside metropolitan cities, the bank will receive a penalty in its Community Reinvestment Evaluation. Since the results of the Community Reinvestment Evaluation are used in selecting local government treasury banks, the government intends to increase the burden on banks when they streamline branches in non-metropolitan regions.

Yonhap News Agency

On the 4th, at the meeting titled "The Chairman of the Financial Services Commission Listens to the Voices of Financial Consumers" held at the Government Complex Seoul, Financial Services Commission Chairman Lee Eogwon stated, "We will improve the system so that, going forward, mergers and consolidations of branches within 1 km, which have so far been treated as an exception to the branch closure procedure, will also be decided only after going through prior procedures." He added, "To ensure financial access for financial consumers living in non-metropolitan areas, we will expand the penalty in the Community Reinvestment Evaluation when branches are closed in regions outside metropolitan cities."

The procedures that must be followed when closing a bank branch will be significantly strengthened. Even when a branch is integrated with another branch within 1 km, banks will be required to carry out all branch closure procedures, including prior impact assessment, hearing local opinions, preparing alternative measures, and giving prior notice to customers. The method of prior impact assessment will also be systematized. The Financial Services Commission explained, "Currently, it is being operated somewhat formally and differently by each bank," and added, "Going forward, we will reorganize the evaluation framework into the stages of 'status analysis–impact assessment–decision on alternative measures,' and expand the evaluation items from the current 4 to 8 detailed items."

In particular, the criteria for the Community Reinvestment Evaluation will be revised to strengthen incentives to maintain branches in non-urban areas. When branches are closed in regions outside metropolitan cities, the penalties will be increased so that banks that maintain branches can receive more favorable evaluations, for example in the selection of local government treasury banks.

Disclosure of information related to branch closures will also be expanded. Through the Korea Federation of Banks' consumer portal, key elements of the prior impact assessments and the locations of alternative service channels, which have so far not been disclosed, will be made public, and a function to search branches by region will be added. The Financial Supervisory Service will regularly analyze and review each bank's branch operation status and the results of prior impact assessments.

Alternative measures will also be secured in parallel to reduce gaps in face-to-face financial services. Taking into account the elderly and other digitally vulnerable groups, digital branches will be recognized as an alternative only when at least one support staff member is assigned, and the operation of mobile branches will be expanded mainly in non-urban areas. The provision of banking services using the nationwide post office network will also be expanded. The Financial Services Commission plans to launch a pilot program within this year and then pursue institutionalization through amendments to the Banking Act. Reflecting these changes, the Korea Federation of Banks will revise the "Joint Procedures for Bank Branch Closures" in February and, after each bank incorporates them into its internal regulations, begin full implementation from March.

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