The number of bank branches has a direct impact on the corporate ecosystem within a given region, a study has found. Business circles point out that region-tailored supplementary policies are needed, as the recent pace of branch closures has been accelerating.
The Korea Institute for Industrial Economics and Trade (KIET) released a report Friday built around these findings, titled "The Productive Role of Finance in Regional Economies — Focusing on Changes in Bank Branches and the Dynamics of Firm Births and Deaths."
The institute analyzed 161 cities, counties and districts nationwide from 2016 to 2024. The results showed that in a year when the number of bank branches increases by one, the number of new firms in that region rises by about 29, while the number of dissolved firms falls by about 33.
The report explained that the number of branches moved in the same direction as the number of new firms, and in the opposite direction to the number of dissolved firms. Park Min-sung, an associate research fellow at KIET, interpreted the findings as follows: "This confirms that branches are not merely administrative bases but productive assets that, as the region's credit and information infrastructure, simultaneously support firms' entry and survival." He added, "The results show that even amid the spread of non-face-to-face finance, physical branches still exert a meaningful influence on regional corporate activity."
The report found that the number of bank branches in Korea peaked at 7,702 in the second half of 2012, then fell about 28% to 5,513 in the second half of last year. By province and metropolitan city, Daegu posted the highest rate of decline at -28.2%, followed by Seoul (-27.3%), Daejeon (-24.5%) and Busan (-21.7%). Three of the four regions with the largest declines were metropolitan cities outside the capital region.
Areas under provincial jurisdiction saw a relatively moderate decline of -7% to -15%. However, 72 cities, counties and districts nationwide had five or fewer branches, and 96% of these were located outside the capital region. Sejong (2.4%) and North Jeolla Province (10.4%) were the only ones among the 17 cities and provinces to see an increase in the number of branches.
The report particularly pointed out that the pace of branch decline in metropolitan cities outside the capital region was about three times faster than in cities and counties within provinces, stressing the need for a response in terms of balanced regional development. In the short term, it recommended building an early-warning system to detect deteriorating financial accessibility in advance for regions where branch closures are concentrated. In the medium term, it suggested reviewing policy measures such as dispatching region-focused credit assessment personnel, strengthening collaboration between local banks and regional credit guarantee foundations, and expanding mobile branch services.
