Rural Bank Closures

Nicholas Dakin Excerpts

Tuesday 21st February 2012 Westminster Hall

[Roger Williams]

The hon. Gentleman anticipates a theme that I intended to expand later in my remarks. I value the work done by credit unions, but in the area of Wales with which I am familiar, they do not seem to enlarge and extend their capacity to provide facilities for businesses, or even mortgages, but work only at microfinancial level. The hon. Gentleman makes a good point, and in these extreme circumstances it may be that the mutual model will once again establish itself and become more important in our communities, which I would welcome.

The Presteigne chamber of commerce has a very active chair, Rosamund Black. She fears that the closure of HSBC will cause extreme inconvenience and hardship and seriously damage the structure of the town. She said to me that people use the bank for more than simple financial transactions; the staff provide a vital service in offering advice and helping to solve the banking queries of many residents, particularly the elderly, whom they help with bill payments and other financial transactions.

However, despite the efforts of the community—I pay particular tribute to the mayor of Presteigne, John Kendall, to the Assembly Member for Brecon and Radnorshire, Kirsty Williams, and to the chair of the chamber of commerce—they appear to have been unsuccessful in persuading HSBC to maintain the bank. Indeed, that closure will follow other closures.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate the hon. Gentleman on securing this timely debate. The HSBC branch in Kirton in Lindsey, in my constituency, announced recently that it was closing. The situation mirrors exactly what the hon. Gentleman is describing in terms of the role of the bank in the community. It is one of the key pillars of the community. Taking the bank away unsettles the whole community infrastructure in the way he describes, and that is not driven by customer preference. It is driven by the mission of the bank. In the case of the Kirton in Lindsey bank, it means that constituents will have to travel 9 miles to the nearest banking facility, so this is clearly an issue that needs addressing. I congratulate the hon. Gentleman on airing it today.

[Roger Williams]

The hon. Gentleman makes a very good point, because public transport in rural areas is difficult at the best of times. Requiring people to travel distances of 9 miles or, in an example from my constituency, 14 miles makes it very difficult for people to obtain the advice and support that they need in making financial decisions. There have also been a number of closures by HSBC in Wales. The closures in Llandysul, in Ceredigion, and in Llanrhaeadr-ym-Mochnant in Powys, in the constituency of my hon. Friend the Member for Montgomeryshire (Glyn Davies), have been among six closures in Wales since September. I think that there has been a total of 17 closures across Wales by HSBC since 2009, although I should add that not all of those have been in rural areas.

However, this debate has not been called to highlight cases in my constituency or to single out HSBC. A recent report from the Campaign for Community Banking Services produced a breakdown by region and country of the number of communities dependent on one or two banks, together with a report on the situation for individual banks. The latter revealed the halving of HSBC’s share of one-bank communities in England and Wales to 10% as it continues significantly to reduce its network coverage. Perhaps the case of Presteigne and other closures explain why there is no mention of HSBC’s popular slogan, “The world’s local bank”, in its January 2012 television advertising campaign.

Figures from last year show that since 1990, 44% of all banks, including converted building societies, have been closed. That equates to 7,555 fewer retail banking branches nationwide. That has left the UK with only 190 bank and building society branches per million inhabitants, which is very poor in comparison with the 940 branches per million inhabitants in Spain, 560 per million in Italy and 470 per million in Germany. There is a better geographical spread throughout those countries and they have retained far more locally owned branches. Granted, they generally make modest charges for operating personal as well as business accounts, but at least they have the face-to-face services that so many people still want.

The report of the Independent Commission on Banking, the recommendations of which the Government have pledged to implement in full, stresses the need for a challenger bank and increased competition in high street banking. The German model, for example, provides for excellent competition and a much more community-focused approach. Lowering the barriers to entry and facilitating greater competition could allow for banks specialising in lending to small and medium-sized enterprises, as the Federation of Small Businesses has suggested, for banks that have a more local or community focus or perhaps even for banks that specialise in providing facilities for groups that are normally hard to reach, such as rural communities.

2011 showed no sign of a slowdown in the number of closures. A Campaign for Community Banking Services report that came out earlier this month showed that the number of rural communities with only two banks remaining is 446.

--- Later in debate ---

[Roger Williams]

I thank the hon. Gentleman for that intervention. One reason why I called for the debate is that I am not prepared to allow the closures to go unnoticed. By bringing the issue to the attention of the Government and right hon. and hon. Members, I intend to bring it to the attention of the big four banks, and a number of other banks. These large organisations have a social duty to which they should attend, but it would be useful if the Government could kick things off with an initiative and call for a summit, as the hon. Gentleman said.

When a bank has the last branch in town, it often makes a pledge of some sort to keep it open, but those pledges are often difficult to define; that creates a lot of uncertainty, which can be fuelled by such comments as those made last year by the British Bankers Association. It said:

“Branches will remain open if they are being used. But if the number of customers…coming into the branch falls, then the bank—like any other retail outlet—will need to look carefully at whether it is…viable to keep it open.”

Well, the bank in Presteigne was being used, but a different target was imposed on it, relating to the selling of financial products such as mortgages, pensions and loans. The population of Presteigne is rather stable; it may have made use of those products in the past, but it still expected services from the bank. However, the bank has decided to withdraw from the community.

[Nic Dakin]

Is it not true that banks are encouraging—indeed, almost forcing—customers to go down the route of internet and telephone banking, often against customers’ wishes? That is having an impact on the footfall in branches such as those that the hon. Gentleman describes. These changes are being driven by the determinations of producers, rather than customers, which is a great shame.

[Roger Williams]

I thank the hon. Gentleman, who raises an important point. Information provided to me indicates that two thirds of customers between the ages of 25 and 45 will use internet banking facilities, while only a third of people over 65 have the aptitude to take advantage of such opportunities.