Access to Banking Services

Ben Lake Excerpts

1st reading: House of Commons
Tuesday 27th February 2018 Commons Chamber

[Ben Lake (Ceredigion) (PC)]

I beg to move,

That leave be given to bring in a Bill to make provision about access by customers, in particular those in rural areas, to banking services; to make provision for community banking hubs; to review access to banking services through the Post Office network; and for connected purposes.

In an otherwise fraught and divided political climate, few issues unify Opposition and Government Members from every corner of the British Isles as successfully as bank closures. In short, my Bill would: make it more difficult for banks to close branches; enable the establishment of community banking hubs; and ascertain whether the Post Office has the necessary resources truly to deliver its banking offer.

The insidious decline of the bank branch network is a long-standing phenomenon. The number of branches has halved since 1988, with more than 800 closing in 2017 and a further 250 earmarked for closure this year. In too many instances, banks are abandoning communities that have supported them for generations. That is certainly the case in Ceredigion, where bank after bank has decided to vacate.

Ceredigion was home to some of the first banking networks at the turn of the 19th century, but the 21st century has seen the seaside towns of Aberaeron and New Quay lose branches and the old market towns of Llandysul and Tregaron inherit the unenviable accreditation of being towns without any banks at all. The most recent round of branch closures includes those in the towns of Cardigan and Lampeter. There is no solace to be found in the tragic irony that these rural communities, home to some of the earliest banking networks, could soon be deprived of any at all.

The experience I have described is replicated throughout the UK. The concerns that arise from it do not in any way reflect a romantic fixation with the past or a Luddite reluctance to acknowledge that the way we bank is changing; rather, the transformation of both personal and business banking is developing in such a way as to leave some communities behind. Yes, the use of cash may well have fallen by a fifth in the past decade, and I do not doubt that the number of branch visits has fallen by a third since 2011, but we should not turn a blind eye to the fact that for many individuals and businesses, particularly those in rural or deprived areas, access to banking facilities over the counter is still crucial.

Losing over-the-counter access has a devastating impact on the local community. Too often, online banking is still a hope for the future, rather than a realistic alternative for the present. Indeed, it is often the case that those areas that have suffered branch closures also receive among the poorest broadband services. That is true of Ceredigion, where almost half of all properties do not have “decent broadband” by Ofcom standards. Without access to physical branches, and in the absence of sufficient broadband, people are simply unable to conduct their day-to-day banking online, let alone change their accounts, no matter how seamless or intuitive banks make their websites.

Compounding the lack of digital connectivity is the fact that public transport links are often poorer in rural areas, making that 20-mile or 30-mile journey to the nearest branch even more challenging, especially for the elderly, those with disabilities, and those on low incomes.

The impact of branch closures on small businesses and the local economy is also significant. As the Association of Convenience Stores has noted, 73% of rural customers still pay by cash. A 2016 Move Your Money report found that, apart from the practical difficulties that branch closures cause for the operation of small businesses, they also have a severe impact on local business finance. Bank branch closures dampen small and medium-sized enterprise lending growth by an average of 63%, and postcodes that have lost the last bank in town lose almost £1.6 million-worth of lending over the course of a year. The current trend of branch closures has a devastating impact on individuals, businesses and communities, which the Bill seeks to mitigate.

In all fairness, some banks are beginning to improve the way in which they support communities following the announcement of a branch closure. This is partly a result of the access to banking protocol and its more recent, reinforced iteration, the access to banking standard. Although some banks will adhere to, or even go beyond, the requirements detailed in the standard, it needs to be strengthened further if it is to stem the tide of closures. My Bill would build on the existing access to banking standard and place it on a statutory footing, so that customers of every bank can be assured of best practice.

Currently, communities understandably feel disconnected from the development of local bank networks, so the Bill would require banks to work more closely with the local community prior to a decision to close a branch, as part of their pre-closure assessments, and to determine what options, other than complete closure, are possible. This work would have to include proper consultation with communities so that the full impact of a closure was clear, and alternative options would have to be identified before a final decision was made.

Greater emphasis would be placed on how customers could access cash in rural areas—for example, by taking account of their proximity to a post office, another bank branch or a cash machine—and the distances would be measured in travel time rather than geographical distance. Furthermore, local transport, in addition to broadband infrastructure, would be considered as part of the process. Where the provision is so poor as to exclude customers from accessing an equivalent service, banks would need to work with others to improve the situation and, if necessary, funds should be made available for broadband schemes and skills training.

Consideration would also be given to the wider impact of a closure on a community, including the fact that a branch is often not only the last bank in town but the last service in town. In such circumstances, a bank should be precluded from closing the branch unless an equivalent alternative can be secured, or it should pay a levy to fund the provision of community banking.

To give banks and communities a greater range of options than the closure of a branch, the Bill would provide for establishing community banking hubs. In essence, such an option would enable banks to pool their resources to provide centres in which they could all be accessed by their customers. In other words, the Bill would help banks to co-locate, instead of completely vacating our rural communities. Although there is no specific regulation to prevent banks from sharing branches, such banking hubs would require significant co-operation and a fair amount of trust, in order to overcome their practical and commercial challenges. To address those challenges and inspire collaboration between banks, the Bill would encourage the creation of regional forums, which would open an avenue for banks to discuss ways in which they can work together to maintain a physical presence in communities.

The role of the Post Office, particularly its banking offer, has been referred to in many of the recent debates about community banking. The services available through its network are certainly vast, and in many instances they have served to fill the gap left by the closure of the last bank in town. If post offices are to assume this ever-growing responsibility, it stands to reason that resources will be required to ensure that staff are trained in banking services or that post offices employ those made redundant by bank closures.

Furthermore, many post offices require physical adjustments—from improving accessibility to the installation of private meeting rooms to discuss personal finance matters—to make them appropriate centres for greater banking services. Funds should be forthcoming from either central Government or the vacating banks to support such adjustments. If the Government intend the Post Office to fill the vacuum left by retail banks, they must stand ready to allocate the resources needed for it truly to flourish in this new role. Before that, a review is required to ascertain what precisely is needed. The Bill would provide for such a review.

Taken together, the provisions in the Bill would stem the tide of branch closures. It would ensure that banks give full consideration to the broader impact that closure has on communities, offer an alternative way for banks to maintain their physical presence in rural areas, and determine what support will be needed if the Post Office is to assume an even greater role.

As Professor Griggs noted in his review of the access to banking protocol, we should not wait for branches to close before

“addressing the issues that some have with these changes”.

Rather, banks and the public sector should work proactively to find alternatives

“to help all of us feel that we are part of this journey, and not excluded from it.”

I would be glad to have the opportunity to consider other aspects of this issue, should the House give me leave to bring in the Bill, which I commend to the House.

Question put and agreed to.

Ordered,

That Ben Lake, Liz Saville Roberts, Jonathan Edwards, Hywel Williams, David Linden, Brendan O’Hara, Mr William Wragg, Stephen Kerr, Ruth Smeeth, Martin Whitfield, Caroline Lucas and Jamie Stone present the Bill.

Ben Lake accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 23 November, and to be printed (Bill 169).