FINANCIAL INCLUSION AND LENDING CONSEQUENCES OF BANK BRANCH CLOSURES BETWEEN 2008 AND 2020 IN HUNGARy

Abstract

In the years of the financial and real economic crisis of 2008, a significant trend of bank
branch closures began in the European Union and Hungary as well, which continued after
the crisis and can be continuously monitored until 2020. Accordingly, the number of bank
branches in Hungary halved during this period. As a result of the partial closure of the
branches of credit institutions and the closure of bank branches, the number of settlements
left without a bank branch increased from 1729 to 2456. In this context, concentration was
observed in the country, which by 2020 also exceeded the concentration of the population.
The changes also had an impact on the average distance of settlements not covered by a
branch from the nearest branch, which increased from an average of 5.8 km to 8.3 km
between 2008 and 2020. Settlements that became without a branch during the period can
be considered to be more demographically and economically disadvantaged than those
with a branch, so the wider spread of online banking solutions has social significance
regarding the availability of banking services. The fact that the number of Internet
subscriptions per capita also proved to be lower in settlements not covered by a bank
branch may be a difficulty in establishing a higher level of accessibility. Regarding the
relationship between bank branch presence and lending, our district-level examinations
found a moderately strong relationship between the volume of disbursed loans and the
number of bank branches, while our settlement-level analysis showed a significant but weak
relationship between bank branch coverage and lending. We also found a weak relationship
between the closure rate of the districts and the development of their share in lending in
our analysis.