Regional banks' declining offline business casts doubts over relocation plan of Seoul firms

• Published date: 30 May 2022
• Publication title: The Korea Times

br Experts suggest law revision for regional banks to manage provincial coffersbr br By Yi Whan-wooThe country's regional banks are shutting down their branches over the declining profitability of offline services, which in turn is casting doubts over the feasibility of President Yoon Suk-yeol's plan to relocate Seoul-headquartered financial institutions outside the nation's capital.Yoon has been singling out state-run policy lender Korea Development Bank (KDB) in his relocation plan but also hinted at pressuring other state-owned institutions to move their headquarters by saying, "Relocating only KDB will not be enough.

"Whether the relocation will contribute to Yoon's goal of balanced regional development is not certain, considering demand for face-to-face financial services is slowing in provincial areas due to population declines and greater reliance on digital banking. The unfavorable offline banking business environment is evident in the decreasing number of branches among five major regional lenders Busan Bank, Kyongnam Bank, Daegu Bank, Kwangju Bank and Jeonbuk Bank between 2020 and 2021.Busan Bank saw its number of branches falling from 232 to 212 during the cited period, according to data from the Financial Supervisory Service.

The figure diminished from 146 to 132 for Kyongnam Bank, 235 to 232 for Daegu Bank, 146 to 143 for Kwangju Bank and 97 to 92 for Jeonbuk Bank.The situation is likely to get worse this year, with each of the five considering merging or shutting down more branches.

"We tried to close branches as little as possible despite constant population decline and a fall in the number of offline customers. But such tactics are being drastically revised because otherwise we can't withstand falling profitability over rapid digitalization," a regional bank official said on condition of anonymity.

Accordingly, experts urge the Yoon administration to be prudent in relocating the financial institutions."I agree on a need for balanced regional development and capitalizing on the financial industry to fulfill that goal," said Jung Ho-chul, a program coordinator at the Economic Policy Department of Citizens' Coalition for Economic Justice, a civic activist group.

"But the approach being made by the government does not appear to be based on a thorough understanding of the regional financial industry." He argued it is mostly state-run lenders, including Export-Import Bank of Korea (Eximbank) and Industrial Bank of Korea (IBK), that are being...