High Street Banks and Banking Hubs
Lord Hacking Excerpts(10 months, 1 week ago)
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Lord Hacking (Lab)
My Lords, if I may I would like to say a few words in the gap. It might be thought that the noble Baroness, Lady Tyler of Enfield, and I have been twinning together, because both of us have quite recently been raising this issue of bank closures. I did not know about the work of the noble Baroness until the Minister very kindly told me, in a meeting I had with her about three weeks ago. I should like to make the point that we are acting entirely independently, but worried about the same great issue.
I adopt everything that the noble Baroness, Lady Tyler, has said to us and everything that the noble Lord, Lord Rogan, and the right reverend Prelate the Bishop of Norwich have said. I therefore do not need travel over that ground again. I will just mention one thing. I am in the age group of those particularly affected by bank closures. I am in my mid-80s and therefore I have sympathy—although, luckily, I have been taught about internet banking and so know a few things about that.
I will go straight to an important example—the closure of the NatWest bank in Ryde on the Isle of Wight a few months ago. Ryde is a town of 100,000 or more and for the purposes of getting cash, you now have to walk all the way down the very steep high street to Sainsbury’s, which has a cash machine. However, it is not only people of my age who have difficulty and need personal banking. I will give a solid example. I have a son who is very badly disabled and who until recently was living in Peru. His only source of support is the financial support that the family can give him. My son-in-law is the treasurer of the trust to supply money. It is not easy to convey money in the banking system from here to Peru, and there were occasions when it was not coming through—well, that was the information we were given. I am very well within time; there will be plenty of time for the Minister to reply. Let me just finish this account, because it should be recorded. It was essential for my son-in-law to go personally to the NatWest bank in Ryde to sort out this problem. It would have been so difficult and cumbersome to do it online.
The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, I very much appreciate the opportunity to return to the topic of access to cash and to face-to-face banking facilities. I really do appreciate the strength of feeling across the Chamber on this topic and am very grateful to the noble Baroness, Lady Tyler, for securing today’s short debate.
The Government recognise that banks and building societies occupy a privileged place in society and are essential to enabling people to manage their money on a day-to-day basis. But it is undeniably the case that the nature of banking is shifting. First, there was a move to telephone banking; it took many of us quite a long time to get used to it, but you can now do pretty much anything that you could do face to face on telephone banking. There has subsequently been an ever-increasing number of customers opting for the convenience of online and mobile access. Some noble Lords have explained that they are of a vintage such that they feel that that is not for them. I accept that, but my mother, for example, is of the same vintage, and has embraced it very readily, so there are different people who will take a different view of that. Of course, telephone banking remains available.
If one looks at the hard facts here, in May 2022 only one-third of adults had been to any branch at all to undertake banking activities face to face in the previous 12 months.
Baroness Vere of Norbiton (Con)
That is a significant drop from 2017, just six years ago, when almost two-thirds of UK adults did. Is the noble Lord suggesting that these individuals therefore did not transact at all, or were they able to do it by other means, and have got used to the other means of banking and find them more convenient? Causation and correlation may not quite apply in this.
It is also true that nine in 10 adults bank online or use a mobile app. We cannot reverse the changes in the market and in consumer behaviour; nor can we determine firms’ commercial strategies in response to the changes, which are being led by consumers. Maintaining flexibility to respond to changes in the market is key to what makes the UK’s financial services sector one of the most competitive, innovative and productive in the world.
Decisions on opening and closing branches are taken by the management team of each bank on a commercial basis. The Government do not intervene in these; nor do they stipulate locations for the bank branch network as a whole or for individual banks. The noble Lord, Lord Livermore, mentioned that certain banking initiatives have subsequently closed; it is worth asking oneself why. Was it that actually they were not used?
The Government recognise that access to in-person banking services, particularly cash, remains important to many people across the country. As such, the Government believe that all customers, wherever they live, should have appropriate access to banking and cash services, and that the impact of branch closures should be mitigated where possible. On access to cash in particular, it is worth noting that over 97% of the urban population are within one mile of a free cash access point, and over 98% of the rural population are within three miles of a free cash access point.
The Government have taken action to preserve access to cash, and we legislated through the Financial Services and Markets Act 2023 to protect access to cash for individuals and businesses. This places a responsibility on the FCA to ensure reasonable provision of cash access services. Importantly, in relation to personal current accounts, the FCA is required to seek to ensure reasonable provision of free cash access services. The FCA is currently consulting on its proposed regulatory regime. Under the proposals, banks and building societies designated by the Treasury will be required to assess and fill gaps, or potential gaps, in cash access provision that significantly impact consumers and businesses. Following the consultation, the FCA expects to finalise its rules in the second half of this year.
More broadly, the Government recognise the importance of in-person banking for some people. While decisions on individual branch closures are a commercial issue for firms, which the Government do not intervene in, this Government absolutely support industry-led initiatives to protect access to in-person banking services, such as shared banking hubs, agreements with the Post Office—which I feel are very important—and community outreach programmes, where they work, such as in community centres and libraries.
I highlight the services offered by the Post Office. People can use their local post office under the Post Office banking framework agreement to access everyday banking services, thanks to this commercial agreement. This means that 99% of personal banking customers and 95% of business banking customers can do their banking at the 11,500 Post Office branches right across the country. The noble Lord, Lord Livermore, has a grand plan for some sort of nationalised shared banking hub network. The towns that he is thinking about may not have a branch, but they have a post office, or perhaps there are towns that he would like to write to me about that have neither a branch nor a post office because clearly that is something we could look at. I think the Post Office’s intervention and close working with the industry are very helpful.
Of course, banking hubs can go more broadly than the services offered by the Post Office. Banking hubs are a very exciting development. They are quite a new development. They help businesses and people withdraw cash, make deposits, pay in cheques and check their balances, but they may also have a community banker who can help people with more complicated matters that require specialist knowledge or privacy or when somebody wants to have a face-to-face meeting with a banker. These hubs are deployed in response to a bank announcing a branch closure or a community making a cash access assessment request. Where LINK has assessed a community’s cash access needs and concluded that a banking hub is the most appropriate option, that is done as quickly as possible.
I note the comments by the noble Baroness, Lady Tyler, which were echoed by many others noble Lords, including the right reverend Prelate the Bishop of Norwich. I reassure her that to ensure that there is no gap in the provision of services, the industry has committed that when a hub is recommended, a branch will not be closed until a hub is open. I think that will be welcome news to the House today.
Cash Access UK, the provider of banking hubs, has opened more than 30 banking hubs so far and I expect this to rise to about 50 by Easter. I agree that the speed of the rollout has potentially been too slow, but this is a relatively new intervention and the processes are now in place. I echo the comments of the noble Lord, Lord Rogan, in welcoming the work of Cash Access UK. We support it and are in regular contact with it. I am pleased to report that it tells us that it expects the pace of delivery of banking hubs to continue to improve over this year.
The noble Baroness, Lady Tyler, asked for a target for the total number of banking hubs, and a timeline. Indeed, the noble Lord, Lord Livermore, gave us a target of 350—I have no idea where that came from. It depends on local need and the shape and scope of the banking facilities available over time. Imagine that a new bank were to come along and suddenly open a branch on a high street that already contained a banking hub. If we had a target that there had to be banking hub there, what would we do? Would we close it? It does not make sense. We need the flexibility to work with the network and the system. Provided that we get those banking hubs in place as quickly as possible, I think that is by far the better way to deal with the issue that we face.
There is guidance which provides certainty around the provision of the relevant services. The FCA, the independent regulator, provides clear and unambiguous guidance to banks and building societies to ensure that they carefully consider the impact of planned closures on their customers. It is not just about access to cash; they must consider the impact of the lack of services or the change of channel of services on all their customers. The FCA is taking an assertive approach to encourage firms to follow its guidance. When banks and building societies are closing branches, the regulator expects them to put in place appropriate alternatives where this is reasonable. Where firms fall short of expectations, the FCA can and will ask for closures to be paused or for other options to be put in place.
The FCA consumer duty is also now in effect. It sets higher and clearer standards for customer protection across financial services and requires firms to put their customers’ needs first. The consumer duty also requires that firms deliver “good outcomes” for customers. That means that banks owe their customers a higher and clearer standard of care, and must ensure that customers receive support so that they do not face barriers in accessing their accounts.
I note the comments about charities. On the point made by the noble Baroness, Lady Kramer, about transferring an account from one holder to another for an APPG, those are the sorts of things that I am really concerned about when it comes to branch closures. All noble Lords will be aware that getting a signature on a piece of paper can sometimes be very tiresome, and I encourage all banks to try to sort that out. However, UK Finance is also talking to charities to make sure that they are in contact with banks, because there are a number of things that they can access.
I am out of time. I was going to talk about not only connectivity but digital inclusion, which is important because banks themselves are taking big steps to encourage their customers to become more digitally savvy. Indeed, they are helping those who may not necessarily have the wherewithal to afford the sorts of internet services that one might need. I will write with further information.
I will also write to the right reverend Prelate, and copy in all noble Lords, about credit unions—they are quite interesting—and whether there is a gap in the market for hyperlocal banks that serve a community. I have just come back from the US; that is what they have there, and it is a very interesting model.
NatWest: Account Terminations and Branch Closures
Lord Hacking Excerpts(10 months, 3 weeks ago)
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Lord Hacking
To ask His Majesty’s Government what discussions they have had with NatWest, as a major shareholder, regarding the numbers of (1) payment account terminations, and (2) local branch closures, since 1 January 2023.
The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, the Government’s remaining 37% shareholding in NatWest is managed at arm’s length by UK Government Investments. The Government do not intervene in the commercial decisions of NatWest, including with regard to branch closures and individual account terminations. None the less, the Government are strengthening requirements for all firms around account termination and support the FCA’s guidance on bank branch closures and industry provision of alternative in-person services such as banking hubs.
Lord Hacking (Lab)
I thank the Minister for her reply, but I think the matter should be a little further explored. Will she acknowledge that Which?, the trade magazine, has monitored all bank closures since 2015 and has calculated that in that period NatWest bank as a whole closed no fewer than 1,140 branches? In the same period—and more alarmingly—a total of 5,818 bank and building society closures took place. That must impact on a lot of people. Secondly, will the Minister acknowledge that NatWest and probably other banks are currently closing the accounts of innocent holders without notice and refusing to give any reasons? Again, the impact of that is a lot of distress: for example, for small traders, having their bank accounts taken away can be devastating.
Baroness Vere of Norbiton (Con)
If I may, I will focus on the second part of the noble Lord’s question around account termination. It is an issue that the Government take incredibly seriously. For absolute clarity, the Government are clear that payment account providers must not discriminate on the basis of political belief or, indeed, any other opinion. Therefore, following events over the summer, the Government issued a policy statement on 21 July which very clearly set out that 90 days’ notification must be given to any customer whose account is to be closed. Also, the bank must give a reason for that closure. That will come into legislation in due course. We are working at pace to draft the secondary instrument and it will be laid in your Lordships’ House soon.