Regional banks are increasingly adopting “every-other-day” operations for their branches to reduce staff numbers but continue offering services in rural areas.

The long period of low interest rates has taken a toll on their traditional businesses, and many banks have shut down branches.

But instead of closing them all, they are staggering the operations of nearby branches to ensure areas are not bereft of banking services.

However, given the expenses needed to maintain and repair the buildings while customer numbers decline, it is unclear how long this strategy can continue.

FAMILIAR FACES

In late June, many customers who were trying to complete their banking chores for the month visited the Yoshinoguchi branch of Nanto Bank in Gose, Nara Prefecture.

One of them, a manufacturing company owner in his 70s, came to the branch to transfer salary payments to his employees’ accounts.

He has been using Nanto Bank for about half a century, including for financing, mainly through the Wakigami branch.

But the Wakigami branch was closed on that day in late June, so he had to visit the Yoshinoguchi branch, which was 3 kilometers away.

Nanto Bank, based in Nara Prefecture, started every-other-day operations for two sets of two branches in spring 2020.

One branch of each pair is open on Mondays, Wednesdays and Fridays, while the other opens on Tuesdays and Thursdays.

A total of 10 people used to work at the Yoshinoguchi and Wakigami branches, but the number was slashed in half. The five remaining staff members now work at both branches.

“I was worried about whether the procedures would go smoothly,” the business owner who visited the Yoshinoguchi branch said. “But it turned out there were no problems because the same clerks work at both branches.”

REDUCING COSTS

The Yoshinoguchi and Wakigami branches stand in what had been a thriving area for the forest industry, particularly for “Yoshino sugi” brand wood.

The area also has produced famous “Yoshino kuzu” used for Japanese sweets.

But things have changed.

“The local economy has not been thriving like before,” said Kazuhiro Yasukawa, head of the Yoshinoguchi branch.

The branches are surrounded by residential areas, and many of their customers are elderly individuals, not companies. The number of customers has also been decreasing.

After Nanto Bank struggled to reduce the costs to run its branches, it decided to carry out large-scale restructuring that cut annual operational expenses by an estimated 400 million yen ($ 2.7 million).

It shut down branches and combined 30 others, but it tried to retain branch numbers and accounts to make services easier for customers.

“The area’s population is aging and public transportation often does not run, so we took an every-other-day-operation style for customers’ convenience,” Satoshi Goto, vice head of the sales support division of Nanto Bank, said.

Managing regional banks has also reached a turning point because of digitalization and other factors.

“We had to restructure branch networks in accordance with the needs of customers instead of continuing our traditional practice of setting up offices near stations or in densely populated areas and waiting for customers at those branches,” he said.

Banks were originally obliged to operate their branches every weekday under the Order for Enforcement of the Banking Law. But the Financial Service Agency amended the law in 2018, allowing banks to close branches on weekdays.

That legal change also allowed regional banks to start every-other-day operations.

The Bank of Kochi in Kochi Prefecture introduced such operations at its Ikegawa and Ochi branches in July.

The Ikegawa branch is the only financial institution operating in the mountainous location. So, the Bank of Kochi didn’t close it.

However, it instructed the branch to focus on individual customers, while representatives from nearby branches visit corporate customers when asked.

San-in Godo Bank, headquartered in Matsue, Shimane Prefecture, adopted every-other-day operations at two branches in the Oki islands.

The bank integrated 33 branches and sub-branches in 2020 because its customers have decreased in number by 40 percent over the past 10 years.

The two branches are the only ones on their respective islands in the Oki chain.

Although the two island branches also had fewer customers, the bank keep them open for the convenience of the remaining clients.

To improve efficiency, the bank adopted every-other-day operations at the two branches in 2023.

San Ju San Bank, a financial group located in Yokkaichi, Mie Prefecture, and created through the merger of Mie Bank and Daisan Bank in 2021, introduced every-other-day operations in 2022 at its Isobe and Hamajima branches, both in Shima, Mie Prefecture.

The bank kept open the Hamajima branch because another regional bank had already shut down its offices in the area.

San Ju San Bank said it wanted to avoid a situation in which no financial services would be available in the area.

Quite a few branch buildings of San Ju San Bank are old and in need of repairs, including the Hamajima branch.

A bank official said introducing the every-other-day operations instead of closing the branch was a special case.

In June last year, Tohoku Bank, headquartered in Morioka, became the first regional bank in the northeastern region to adopt every-other-day operations.

Fukuoka Bank will also start every-other-day operations in October at its branch in Kama, Fukuoka Prefecture.

“The low interest rates forced banks to curb hiring, and they are suffering from worker shortages,” said Hideo Oshima, a senior researcher at the Japan Research Institute. “Adopting every-other-day operations increases building costs, but it halves the number of staff at branches. So, banks can allocate staff to high-demand financial consulting jobs.”

He continued: “Regional banks’ strength in branch networks enables them to compete with megabanks. They need to search for effective ways to use these branches in this era, such as operating branches that specialize either in agriculture industry or local corporations.”