Rural Bank Closures

Debate between Roger Williams and Chloe Smith

Tuesday 21st February 2012 Westminster Hall

[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.