Are banks closing their branches during the COVID-19 pandemic

Adam Rust

Will banks close their branch offices during the coronavirus pandemic?

In this blog, I will update readers with a collection of announcements made by banks on how they may or may not choose to limit access to their bank branch offices during the coronavirus pandemic.

Branch Access during the pandemic: Current policies announced by US banks

  • On March 13th, First National Bank (PA)announced that it would close the doors to all of its branches, beginning on March 16th, except for pre-arranged in-branch appointments. Otherwise, the bank will only offer services via drive-through windows or ATMs.

I think the pandemic may be an opportunity for some digital banks to capture market share. First, these institutions have been prepared for some time. They all have remote deposit of checks - for free. From inside their apps, customers can manage all aspects of their account.

Secondly, we are experience a bottoming out of interest rates. Yields on ten-year treasury notes have fluctuated from 0.3 percent to 0.9 percent during the last few weeks. Most banks have ceased to offer any interest on checking or savings account balances. The digital banks are still offering yields north of 1 percent on their savings account. Axos is paying 1.3 percent on savings (March 17th, 2020) and Varo Money is offering 1.92 percent.

If you need an online bank account, consider one of these options.
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Person making a choice to bank with an app instead of using a bank branch

The Regulatory Response to the Covid-19 pandemic

The FDIC issued guidance for the banks it insures concerning how those institutions should operate during the pandemic. Notably, a guidance document differs from an order. They hew more closely in tone to advice – it is not a mandatory rule. Still, banks tend to pay attention. Banks hire many lawyers, and those lawyers tend to push their employers to pursue safety and soundness above all else. Plenty of attorneys recraft sentences, striking words like “should” and “will” to replace them with “may” and “could.”

Most of the document speaks to hygiene:

  • Have a plan for sanitizing surfaces inside branches and offices.
  • Implement social distancing wherever possible
  • Pre-arrange to have alternative means of providing financial services
  • Internally, financial institutions should shift their operations toward more use of conference calls, remote work, online workflow management systems (Asana, Trello, et al.), video conferencing, webinars, and other communication channels that can substitute for in-person engagement.
  • To the public, banks should limit entry to branches for services that customers can complete through ATMs and drive-through windows.

I see plenty of opportunities for institutions to reduce branch visits, although I say that with the caveat that large banks have generally made more investments in high-tech infrastructure. For example, not every bank has purchased ATMs that take deposits. Will small community banks adapt? Possibly, but only if they already have the technology in place to deploy. Speaking broadly, I doubt that, as smaller institutions already struggle with tech. Small banks are less likely to have an app, and even fewer have apps that allow for remote deposit of checks, and even fewer offer the service for free. Small banks already struggle to keep up with online fraudsters.

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