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20,000 Bank Shops Have Closed Since Beginning of Crisis

Published: August 12, 2013; 16:56 · (Vindobona)

60 percent of the costs in the business with private clients are caused by bank shops. Still, banks are hesitant to close them as they fear the loss of long-term clients.

20,000 Bank Shops Have Closed Since Beginning of Crisis / Picture: © Flickr

Since the peak of the financial crisis in 2008, more than 20,000 bank shops have been closed within the European Union. In the last year alone the crisis-struck banking institutes have reduced the number of subsidiaries by 5.500 and by 7,200 in 2011, according to an analysis by Reuters based on data by the European Central Bank (ECB). The number of branches decreased eight percent since 2008. Last year, the decline came at 2.5 percent.

The financial institutes intended to reduce costs by the closing of branches and therefore improve profits. Furthermore, the constant increase of internet banking supports this trend which, according to experts, will last for years.

Hardly a bank can afford the luxury of unprofitable branches these days. After all, the branch network causes around 60 percent of all costs in the business with private clients, according to an analysis of Deutsche Bank. This is why the banking sector in the European Union could generate further profits in the amount from € 15bn to € 20bn until 2021 at the latest by the dilution of the network, according to bank associations and consulting enterprise McKinsey.

Yet many banking institutes are hesitant even though they admit at the same time to proceed too slowly at the dilution of network. They fear the loss of long-term clients and protests in rural areas. “A closing always provides an occation to think about a change of banks, Fabrice Asvazadourian of consulting enterprise Roland Berger explains.

At the end of 2012, there were a total of 218,687 bank branches, according to data by the ECB, which equals one subsidiary per 2,300 citizens. The closing of banks occurred mainly in countries in the center of the debt crisis. In Greece, banks closed mainly because of the merger of regional institutes. Almost six percent of all banks closed in the mediterranean country while Spain lost around five percent of its bank branches in 2012. In Ireland and Italy the decrease came at more than three percent. In contrary to the Western European countries, the CESEE region saw an upturn: The numbers of bank branches increased in Poland, the Czech Republic and Lithuania.

Since the financial crisis, Spain has experienced the most dramatic decrase: the number of bank branches decreased by 17 percent in four years. Still, the country has the densest network since a bank branch serves around 1,210 citizens. The dilution of the network is a condition for receiving international bailout. French bank institutes were not as affected: only three percent of them had to close while in the UK it was five percent and eight percent in Germany.