Answer to Question #318107 in Finance for Naveen

Question

Suppose the regulator asks one of the losses making Bank XYZ to close a few branches

to reduce cost thereby make the bank more sustainable/profitable. But XYZ Bank

refuses to close its few branches, citing some risk/s involved in the process. What are

the risks XYZ Bank perceives if it closes a few branches?

Answer 1

A risk of loss of trust . Closing branches may erode goodwill, and may eventually lead to exodus of customers who may lose trust in the bank’s viability and commitment to them.

A risk of potential backlash and loss of brand loyalty. If the bank close branches, particularly in rural, poor regions, or in locations with minorities, it will not look good, and it may face PR backlash.