Labour MP of Chester Christian Matheson leads House of Commons debate on Bank Branch Closures

20 Jul 2016

On the 30th June, the House of Commons debated the issue of continued bank branch closures and deliberated the potential solutions to the social problem. The debate was led by Christian Matheson, Labour MP (Member of Parliament) for Chester. The House considered the social, economic and physical damage incurred by increasing bank branch closures, with a distinctive regard to the following groups: senior citizens, local residents from urban communities and SAME (small and medium enterprises).

The lengthy debate drew insight from various members of parliament on the effect of bank branch closures within their respective constituencies, which have been adversely effected by the decline. Technological advancement within the banking sector has given rise to online/telephone banking and services, and serves as the rationale typically used by banks to justify the extent of local bank branch closures and their subsequent replacement by centralised banks in the larger towns. Although the convenience of the technological advancement of the banking sector has been mutually accepted in the House and is in no way being called to decelerate; disapproval arose over the social bias by banks when invoking their closures and the impact this has had on certain groups and communities. Concerns were expressed over the fact that bank closures tend to involve a closure in poorer and rural areas, followed by a relocation to their wealthier counterparts. According to various Members of Parliament, this has had social and economic implications for residents within their constituencies, particularly those from rural communities who are least likely to be able to practically access online/telephone banking services due to signal problems. The resonating opinion in the House was that the physical presence of banks still has great importance despite the digital age and hence, more action must be taken to ensure the locality of banks.

MP Christian Matheson pointed out that for “the elderly, people with caring responsibilities and small business owners – high street banks’ ‘programmes to close many of their smaller branches and centralise everything in the centre of large towns create havoc for individuals and businesses and damage local communities”. Small businesses cannot make use of internet banking and are at a disadvantage as they rely on the vicinity of banks for increasing custom. Chris Davies (MP for Brecon and Radnorshire) supported this claim, asserting that branch closures lead to a reduced footfall in town, which subsequently reduces the amount of customers in local businesses and decreases the rent of landlords.

The social division of local bank branch closures is supported by global news agency Reuters, (whose data which draws from the past 12 months to April of this year) indicates that ‘more than 90% of the closures were in areas where the median household income was below the British average of £27,600’; whilst ‘by comparison 5 out of the 8 branches opened by these banks over the same period were in some of the wealthiest neighbourhoods in Britain’ including Chelsea and Canary Wharf. Matheson maintained that this trend has caused an additional physical strain for the pensioners in his own constituency (Chester) who now have to travel further into the city. Other members of the House expressed concern that the decline of local branches and an increased reliance on online and telephone banking would exacerbate the vulnerability of such groups to online and telephone banking scams which is already a pressing issue.

Potential Solutions to the Decline of Local Banks

Christian Matheson then addressed the house, putting forward his own speculative solution to the issue before inviting the members to further deliberate potential solutions. Matheson suggested the notion of local banking hubs; where high street banks would maintain provision on local high streets as an alternative to major town centre high streets, in shared premises and with shared costs. He proposed that banks should come to his constituency Chester to try the initiative by setting up a joint hub for the next 2 years. Alternatively, he insisted that banks could stop initiating false advertising which suggests that they are more accessible, whilst continuing to close local branches.

A proposal put forward by the House included the expansion of the mutual sector. This sector entails financial institutions owned by and which run for the benefit of its members. The absence of external shareholders to pay in the form of dividends, make the mutual banking sector inherently less incentivised to maximize profits, issue social biases through their actions and prioritize the wellbeing of their customers. For instance, it was mentioned that Nationwide tends to be slower to close down its local branches and furthermore, Fair Finance encourages lending for individuals who cannot get loans from traditional institutions.

The House also discussed the appropriate role of government and the scope of their intervention. A crucial idea was that government should exert greater pressure on the big financial institutions to lend to deprived communities or to alternatively, work with other organisations such as community banks, responsible finance providers and credit unions to offer a more comprehensive service on site.

The increasing importance of post offices amidst the increasing centralisation of banks and whether or not they are a feasible alternative was another central consideration within the House. Although it was acknowledged that more post offices are increasingly providing banking facilities, the viability of the institution as an appropriate substitute was generally dismissed by those in the commons. The importance of the physical presence of local banks and the resolve for further action to facilitate this was the prevailing sentiment in the House.

For more on the subject of bank branch closures, read our guest blog from Fionn Travers-Smith of Move your Money