In recent years bank branches have been closing at an alarming rate,with more than a quarter of branches closing in Wales in the last five years alone. While over the last 10 years 40% of all branches of the “big four” high street banks have closed in Wales. The number of free-to-use ATMs in Wales has also seen a recent decline, falling by 10% in the year to March 2019.
A recent inquiry into ‘Access to Banking’ by the Economy, Infrastructure and Skills Committee looked at the many ways in which bank branch closures, as well as the loss of free-to-use ATMs, can affect people, communities and businesses. The Committee also explored the steps that government and others could take to improve the situation and considered the Welsh Government’s recent decision to support the establishment of a community bank in Wales.
The Committee made 14 recommendations in total - 13 directed at the Welsh Government and one at the UK Government. The Welsh Government has accepted 12 of the recommendations (either fully, in principle or in part) and rejected one recommendation.
How did the Committee reach its recommendations?
As part of the evidence gathering process, the Committee ran an online survey which collected the views of almost 900 people and held focus groups with community groups in areas that had seen the closure of the ‘last bank in town’.
The Committee found that there is a clear tension between the fact that customers view banks as providing a vital public service whereas, in reality, decisions on bank closures are entirely left to the market, with customers informed rather than consulted on closures.
The Committee also heard overwhelming evidence of the negative impact of bank closures and reductions in free-to-use ATMs in Wales. The survey found that 87% of personal banking customers and 78% of business banking customers had been affected by closures and that 50% of respondents were concerned about having access to cash withdrawal facilities.
More than a third of respondents to the survey (36%) said they had to travel an extra half an hour to access a bank branch and for 29% of people it was an extra hour of travel.
All parts of Wales are affected, but the problem of accessing cash and banking services is particularly acute in more rural areas, and for older and disabled people. Senedd Research has produced maps to show how bank branch closures over the last 10 years have led to many people having to travel far greater distances to visit their nearest bank branch.
The darkest purple patches show areas where the travel distance to the nearest bank branch is one mile or less. The lightest purple patches show areas where the travel distance to the nearest bank branch is between 3 and 5 miles. In any white area on the map the travel distance to the nearest bank branch is over 5 miles.
What can be done to improve the situation?
The Committee explored the potential benefits and challenges involved with establishing a community bank with multiple branches in Wales, as a way of improving the situation.
The Welsh Government is actively supporting Banc Cambria and the Community Savings Bank Association (CSBA) to ‘test the feasibility of establishing a community bank for Wales’. In giving evidence to the Committee, Mark Hooper of Banc Cambria set out the potential future scale of the community bank stating that it could ‘easily top 50 branches across Wales’ within 5 to 7 years. Of those 50 branches, all of which would offer free-to-use ATMs, he estimated that about 12 branches would be fully staffed while the other 38 would have a more automated approach involving fewer members of staff.
The Committee received mixed views about the Welsh Government supporting the creation of a community bank in Wales and the potential positive and negative impacts it might have. For instance, Cambrian Credit Union highlighted that a community bank, run as a cooperative for the benefit of its members, has the potential to act as a ‘catalyst for greater fairness and less exploitation in the delivery of financial services’.
However, there was also concern expressed within the credit union sector. A group of 11 Welsh credit unions wrote to the Committee to draw attention to the fact that Banc Cambria’s intention to provide personal loans on a cooperative model basis would be “in direct competition” with credit unions and would ‘directly threaten the future sustainability of the credit union network in Wales’.
The Committee also received strong evidence regarding the challenges involved in setting up a community bank – not least the financial and regulatory requirements, the timescales for setting it up, and the need to attract significant numbers of people to switch their bank accounts.
What did the Committee conclude?
Overall, the Committee acknowledged that ‘the arguments presented in favour of a community bank for Wales are compelling’. However, the Committee also voiced a note of caution that community banking in the UK represents ‘uncharted water’.
As a result, the Committee recommended that the Welsh Government should set out its strategy for ‘managing the on-going risks associated with putting public money into the un-tested Community Savings Bank Association banking model, and clarify the level of future support it anticipates offering the community bank’. The Welsh Government accepted this recommendation.
The wider issues that need to be addressed in response to falling numbers of bank branches and free-to-use ATMs are many and varied. This is reflected in the Committee’s other recommendations which cover areas such as government regulation, financial and digital inclusion, town centre regeneration and planning, the role played by the Post Office and credit unions, digital connectivity and the Welsh language.
Article by Ben Stokes, Senedd Research, National Assembly for Wales