MADRID (Reuters) - Spain’s Santander plans to close around 450 small domestic branches as part of an overhaul in response to rising regulatory costs and a push into digital services, according to an internal memo from the bank’s CEO seen by Reuters.

Spain has long been among the European countries with the most bank branches per head of population and many lenders still have larger than average networks, even after cutting staff and shutting outlets in the wake of a deep financial crisis in 2012.

Like peers worldwide, Spanish lenders are also trying to cope with a shift to online and mobile-based business, as well as with rising expenses derived from regulatory demands to boost capital and risk controls.

There is also the threat of nascent “fintech” rivals exploiting new technology opportunities.

Spain’s largest bank has 3,467 domestic branches and plans to close around 450 of those, the lender’s Chief Executive Jose Antonio Alvarez said in the memo sent to employees.

Nearly three-quarters of those have between one and three workers, according to the memo, though no details of how many employees many be at risk of redundancy or the time frame for the closures.

“Inevitably these measures will lead to a reduction in the number of people in the corporate centre and Santander Spain,” Alvarez said.

“The transformation process involves taking difficult decisions, but it is essential to ensure our leadership in the coming years.”

Unions expect to discuss the restructuring process next week, one of the country’s main unions UGT said in a statement.

Around 1,000 Santander employees out of just over 30,000 in Spain could be affected by the branch closures and changes to the corporate centre, Expansion newspaper reported on Friday without citing sources.

Other European banks, including in France and Britain, have also been shutting branches or grouping smaller offices into bigger, refurbished ones than can offer a range of services.

Santander will also be upgrading some 350 larger offices this year, fitting them with more modern cash machines, the CEO said.

Low interest rates are squeezing European banks’ margins, while increased competition for a limited amount of new business and the threat of new fintech companies are also forcing lenders to consolidate, Citi analysts said.

“In the absence of consolidation (for the moment), cost cutting in Spain is one of the very few levers left to maintain/increase earnings,” Citi said in a note.