In its annual report, the Bank for International Settlements (BIS) said that banks should now focus on profit after having strengthened their capital reserves.
The report noted prolonged low interest rates and weak economic growth have been weighing the profitability of banks, necessitating exploring other ways to raise income.
BIS said: "With the global growth outlook softening, rising NPLs are also expected to weigh on emerging market economies (EME) banks’ performance.
"Most vulnerable are banks in countries where financial booms have been turning or are in the late stages, such as China and other East Asian economies, or where large exposures to commodity-and energy-related sectors bulk large."
A few banks in Europe have already announced trimming their branch network as customers increasingly shift to digital banking services.
The group said: "It will be critical to cut excess capacity. One gauge of potential overcapacity is the density of bank branches.
"This measure, while broadly declining post-crisis, is still high for several European countries by international standards."
Recently, German banking giant Deutsche Bank announced to cut 3,000 jobs and close 188 branches in the country.
Last year, the lender said that it would eliminate thousands of jobs to reorganize its business as customers increasingly prefer digital banking services.
According to BIS report, the number of bank branches stood in the range of 60 to 70 per 100,000 adults in Spain and Italy, while the count was below 40 in Japan and the US.
It added: "And the overall scale of the adjustment so far appears rather limited compared with historical crisis experience. After the onset of the Nordic crisis in 1991, for example, banks in Finland reduced the number of branches by more than 40% within four years, while cutting operating expenses by more than 50%."
