Rural Bank Closures

Roger Williams Excerpts

Tuesday 21st February 2012 Westminster Hall

[Roger Williams (Brecon and Radnorshire) (LD)]

It is a great pleasure to bring this important matter to the attention of the Chamber, and to serve under your chairmanship, Mr Brady. About a year ago, I secured a Westminster Hall debate on a similar matter. Another Treasury Minister responded to that debate, but it is a great pleasure that this Minister is present today to respond to my remarks.

I have secured the debate to reiterate my concerns about the closure of bank branches in rural areas. Although 20% of the population live in rural areas, it has never been more difficult for them to access money and financial services. As hon. Members may recall, I raised this issue nearly a year ago following the closure of Barclays bank in Rhayader in my constituency. That town of nearly 2,000 people was left with a single branch of HSBC bank that ran a reduced service just three days a week. Such a situation made it increasingly difficult for local people and businesses to access their money, and meant that they had either to change their account to HSBC, or travel 14 miles to Builth Wells and the nearest Barclays bank.

Sadly, Brecon and Radnorshire now has a new case study. On 9 March this year—unless the bank has a Damascene conversion as a result of this debate—the branch of HSBC in Presteigne will close. That will leave a community of nearly 2,500 people with just one branch of Lloyds TSB that is open only on Wednesday and Friday and between the limited hours of 9.30 am to 3 pm—a mere 11 hours per week. Furthermore, the branch has no cash machine, and I will return to that point. News of the branch closure met with a huge response from the people of Presteigne, who managed to collect more than 500 signatures in a petition against it. They see the closure as a desperate shame; one resident told me that she has seldom seen the bank empty, and that there is usually a queue.

Let me describe Presteigne in a few words. The editor of Country Life magazine, Clive Aslet, considers it to be one of Britain’s top 10 towns in which to live. It is an active, transition town that engages with environmental issues to an extent rarely seen in other places. It is heading towards a strategy of zero waste; a large allotment area has just opened and proved popular. The voluntary East Radnor day centre brings in elderly people from the countryside to share friendship and a meal together, as well as providing other services. Presteigne’s music festival is internationally renowned and premiers many musical compositions.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

The hon. Gentleman is describing Presteigne, which sounds almost as beautiful and wonderful as north Harrow in my constituency. That area has also lost its last bank branch, which is impacting on businesses. Does he think that it is incumbent on the Government, perhaps through the Minister, to convene a summit of the big banks and demand that where a bank branch is the last in a community, banks must respect the need of that community for it to remain open? To help the Government achieve that objective, does the hon. Gentleman think that it is worth considering a British version of the Community Reinvestment Act, which forces banks to disclose where they lend and to demonstrate that they are performing well in order to maintain their banking licences?

[Roger Williams]

I believe that the Government have a role to play, and such a summit may be the way forward. We could also support trials of community banks in which a number of different banks come together to provide banking facilities, thereby cutting costs for individual banks but maintaining a facility for the community.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

Should we not be a little careful about taking this issue out on the banks that are still in rural areas? We should be going after those banks that were first or second to leave an area, not those that have stuck it for as long as they have.

[Roger Williams]

My hon. Friend makes a good point, but the responsibility lies with all the banks. They have got to come together a find a way of addressing the problem.

[Chris Ruane (Vale of Clwyd) (Lab)]

Should the Government be looking at closures over the past 10 years, and at which banks have closed branches and which have not? They could then force banks to get together and create a common policy for bank closure programmes in rural areas. Each bank would take part of the burden so that it would not be left to just one bank.

[Roger Williams]

There is a theme running through the interventions that I have taken so far. The problem is a responsibility for all the major banks, rather than for a specific bank in a particular town or community, or even in Harrow. Banks should come together and solve the problem.

Presteigne is not only a sleepy country town; it contains a number of innovative businesses such as Mangar International, which manufactures, designs and supplies rehabilitation and assisted living equipment of a sort not found anywhere else in the world. Teledyne Labtech manufactures microwave circuits, and there are a number of other businesses. We were lucky to have attracted those businesses through the Development Board for Rural Wales, and a number of manufacturing facilities sprang up in Presteigne of which we are proud and wish to hold on to. I cannot, however, see us being able to attract that type of development if there is no bank in Presteigne—it is unlikely that businesses will be attracted to areas where banking is not available.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Gentleman on securing this debate; he has made some pertinent points. Last month I had a letter from my bank, HSBC in Y Tymbl. It is closing, so perhaps I should declare an interest. This issue affects valley communities, as well as rural areas. What thought has the hon. Gentleman given to alternative banking models such as credit unions? In Ireland and the USA, for example, those are mainstream institutions, rather than being banking for the poor as they are in Wales at the moment. They also perform an important economic function by lending to small businesses. Could that be part of the solution?

[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.

[Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Gentleman on securing the debate. He has been a consistent campaigner on this issue. He is setting out how, since he brought the issue to this Chamber in March 2011, the level of bank closures has continued apace. Is he aware of any improvements on the ground as a result of Government intervention—Government policies—since March 2011, or is the lack of any such improvements the reason for his bringing the issue to the Chamber again?

[Roger Williams]

I thank the hon. Gentleman for that intervention, but I think that I have made it clear that although I believe that the Government can take a degree of initiative in this field, it is really the responsibility of individual banks or banks as a whole to ensure that they are able to service these vulnerable communities, because they owe a debt of loyalty to them.

[Chris Ruane]

I thank the hon. Gentleman for giving way to me again. I do not have the exact phrase with me, but does he recall the banker who said, 18 months into the recession, that the time for remorse is over? That banker misjudged the mood of the nation then and, indeed, now. Relying purely on the good will of bankers when that is the feeling from them—the time for remorse is over—is not likely to bring about the change that most of us in this Chamber want.

[Roger Williams]

In the long run, it is in the banks’ interest to ensure that they provide a comprehensive level of service to the communities that they wish to serve and services that are more accessible and more convenient. I think that it is probably the role of the Government to sit down with the bankers, as was suggested by the hon. Member for Harrow West (Mr Thomas), and set out what should be required of banks. Not all the banks were bailed out with public money as a result of the banking collapse, but all banks have benefited from Government action—quantitative easing, for instance—and just about all banks are dependent or have depended on measures that the Government have brought forward. It is time to sit down and see what can be achieved to help these communities.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on bringing this matter to Westminster Hall today. My constituency of Strangford has had two bank closures: the Ulster bank in Portaferry and the Northern bank in Balloo have closed. Two campaigns were fought, but not won. We did, however, win the campaign to save the Northern bank in Kircubbin, with community support. Does the hon. Gentleman agree that the impact of closures on elderly people is horrendous? If there are not banks close at hand, they may carry cash around with them, and many of us will be aware of a large number of people who have been robbed as a result. Banks therefore have a responsibility to elderly people and to rural communities. Perhaps the Government could work together with the banks on that. Perhaps, somewhere along the way, banks need to carry a loss leader, covering their losses in such areas through profits in other areas.

[Roger Williams]

I thank the hon. Gentleman for that intervention. Yes, I believe that there may be a role there. There is the American model of a shared bank, whereby one facility houses different banks. They share the costs and maintain a presence in the community. That may be a way forward; the Government could help with, or initiate, a pilot scheme of that type. I had intended to suggest that later.

[Mr Thomas]

I am grateful to the hon. Gentleman for supporting the idea of holding a summit with the banks to discuss branch closures. Does he not think that having such a summit is all the more important given that the Government’s attitude to bank branch closures has arguably become more depressing since his previous debate last March? I ask that because the Financial Secretary to the Treasury, who has direct responsibility for this issue, has said:

“The Government do not intervene in…decisions as to whether, and where, banks maintain branches.”—[Official Report, 26 January 2012; Vol. 539, c. 329W.]

In a recent debate, he also suggested that if the Government intervened to stop bank branch closures, banks would continue to face high costs. Clearly, a more sophisticated Minister is answering this debate, and one hopes that she will have the courage to take a slightly different view. The answers to our questions surely underline the need for a summit so that banks do not think that the Government condone further bank branch closures.

[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.

[Simon Hart]

That is one issue, but does my hon. Friend agree that another is whether people have the broadband access in the first place to enable to make use of these things?

--- Later in debate ---

[Roger Williams]

That is another point, and my hon. Friend makes it very powerfully. Perhaps the Minister would like to address that problem, too.

I appreciate the coalition Government’s commitment to keeping open post offices, which provide important outlets for financial products, but banks are still the preferred option for many people, particularly when they need advice and support in difficult times.

I have gone on a bit longer than I anticipated, and I am grateful for hon. Members’ interventions. The Government have a role to play. In the American model of a shared banking outlet, many major banks come together to ensure that their facilities can be provided at one point. The Government could have a role in ensuring that pilots exploiting that approach are set up with their backing. The town of Presteigne would certainly be willing and anxious to take part in such a pilot.

--- Later in debate ---

[Miss Smith]

The hon. Gentleman will appreciate that I shall have to leave that to the consideration of my colleague at the Treasury, whose portfolio it more properly is. However, as I said, I am sure that during a slow moment in Committee upstairs, he will read today’s Hansard and take the hon. Gentleman’s views deeply into account.

The Government recognise that people in rural areas experience much the same financial challenges as people living in towns and cities, even Harrow. However, living in a rural area can bring additional challenges apart from the obvious examples of bank closures. Exclusion from financial services can be less visible in rural areas than in urban areas. My hon. Friend the Member for Montgomeryshire (Glyn Davies) and others have highlighted a range of rural challenges. I have some understanding of them myself, having grown up in the fens in rural Norfolk. My first bank account was in a branch in a market town.

With regard to access to bank accounts, the Government are committed to improving access to financial services, as I shall explain, and in particular to bank accounts. It has been amply demonstrated that having a bank account is an essential aspect of modern life and that being able to access counter services at a branch while interacting face to face with staff is a service valued not only by individuals but by businesses. I have also heard the points made today about its tourism value. However, I must point out that decisions whether and where to maintain specific branches are commercial decisions and, as such, for the financial institutions in question. The Government do not intervene in such decisions, as a matter of principle.

All banking service providers must balance customer interests, market competition and other commercial factors when considering their strategy. I note the call by the hon. Member for Vale of Clwyd (Chris Ruane) for banks to balance social responsibility with those factors, but I will say at the outset that the Government have been clear about the need for a change in bonus culture and for banks to contribute to the real economy, support small and medium-sized enterprises throughout the UK and lend to families. The bottom line of today’s debate is that banks have customers, and it is clear that they must treat them fairly in taking decisions about them.

With that in mind, I will set out briefly the regulations that apply. Banks’ and building societies’ treatment of their customers is currently governed by the Financial Services Authority in its “Banking Conduct of Business Sourcebook”, which includes a general requirement for firms to provide a prompt, efficient and fair service to all their customers. The guidance agreed by the industry and the FSA sets out expectations of how banks should live up to that code of conduct and specific guidelines for how banks should behave when considering closing a branch.

The guidance states that if a firm plans to close or move a branch, customers should be notified at least 12 weeks beforehand and told how the firm will continue to provide retail banking services. That includes providing micro-enterprise customers with information on any existing inter-bank agency agreements. A notice should be placed in the branch, and consideration should be given to other local advertising and notification of local councils and community groups. The bank should provide information on alternative facilities offered by the firm in the locality, including its nearest alternative branch and nearest free ATM, as well as other channels through which banking services are provided.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) mentioned free ATMs. I believe that the LINK network, of which, I note, he is perhaps no great fan, runs a phone line that customers can use to propose sites for new free-of-charge cash machines. Perhaps he might encourage his constituents to take that up.

The guidance also requires that customers be notified at least 12 weeks in advance of significant alterations to counter services or opening hours. On the back of those points, first, such arrangements clearly help customers make alternative arrangements to meet their banking needs. Secondly, they enable options to be considered, such as the action plans for which the right hon. Member for Torfaen (Paul Murphy) called. Thirdly, to use an example that we heard today, I am pleased that people in Suffolk, Coastal could respond in that way. When people see a notice in branch buildings, some are clearly able to respond. Fourthly, however, that does not change the end fact that a branch may still be withdrawn.

Let us move on and note what banks offer in addition to their face-to-face services. Several Members have made the point today that banks offer services by telephone and by internet. My hon. Friend the Member for Carmarthen West and South Pembrokeshire raised the significant issue of broadband, which I am sure is on everyone’s minds. The Government have laid out significant plans to improve and complete broadband for rural areas. I could go into that more, but I suspect that that is a different debate and that you, Mr Brady, will not allow me to speak on it. I reassure Members that the Government understand that point and are acting on it.

It is fair to say that the channels I have talked about are not always appropriate for every customer and every service. As hon. Members have noted, having access to a branch with face-to-face services is particularly important for older people and for small businesses that may require cash facilities to trade. However, the fact is that phone and online channels are increasingly popular, and the provision of such services is expanding and diversifying rapidly, giving customers a range of choices as to how they manage their affairs.

It is important to note that many bank account providers have an arrangement for customers to access their accounts via post office counters, which I am glad that hon. Members have noted throughout today’s debate. I know that Members will welcome the Government’s stance on post offices, notably making clear commitments regarding the future of the network—that there will be no further closure programmes and that we will maintain a network of at least 11,500 branches and ensure that specific access provisions for rural areas are included. I understand that 80% of customers now have the possibility of withdrawing or depositing funds or checking their balance at a post office branch.

Hon. Members raised shared branching, which is where several banking providers pool their services in some way. That is an interesting idea that clearly requires a high degree of commercial collaboration. I return to my point that the best people to judge that are the banks themselves, and I would certainly encourage them to consider that idea and also mobile banking, which was also raised in today’s debate.

[Roger Williams]

I can understand why the Minister points out that the Government should not micro-manage banks, but surely, the piloting of an innovative proposal such as shared banking is something that the Government could actively introduce?

[Miss Smith]

I am afraid that that would not be something that the Government could introduce, as the Government do not run banks. Regarding the banks in which the Government are the majority shareholder, they are run at arm’s length, as all hon. Members know, but I hope that my words will serve as a small measure of encouragement. It is a positive idea that could and should be looked at by banks themselves.

Regarding what the Government are doing to promote access to financial services, we are taking a number of important actions to help consumers access the services that they need. We are strongly committed to promoting a diverse financial services sector that serves the needs of the wider economy, which is the one of themes of today’s debate.

To start with, we need to encourage access to savings products. The Financial Secretary to the Treasury announced last week that the Government have launched a steering group to design a range of simple financial products, which will help new participants enter financial markets to provide straightforward and easy-to-understand products. I am sure that all hon. Members present today will welcome that.

I reiterate that we want the industry to take a lead in designing simple products, because we want the products to be viable commercial propositions for customers that will stand the test of time. There is an opportunity for industry to innovate properly, which may include mobile or shared services, and to develop a range of simple products that—again we return to the key point—meet their customers’ needs.