Martyn McLaughlin: Banks should be forced to justify every closure

Anger over the actions of RBS, which remains 72 per cent owned by the taxpayer, has been a common reaction to closure notices. Picture: Michael Gillen

The uniquely calamitous stewardship of the Royal Bank of Scotland during the Sir Fred Goodwin years means that even a decade on from the worst financial crisis since the Great Depression, it continues to occupy an ignominious position in the public’s imagination. It is an institution sullied by recklessness which in the eyes of the public, has become a bellwether of big banking’s folly and hubris.

For the most part, such sweeping assumptions are entirely justified, particularly when it comes to branch closures. The most recent cull by RBS of its Scottish network was especially ruthless. Airdrie no more, Alloa no more, Aberfeldy no more; the cull was so bloody and unsparing, you would be forgiven for mistaking the corporate press release for the lyrics of Letter from America by The Proclaimers.

With 62 Scottish branches - many in rural and remote communities - set to go as part of a UK-wide purge totalling some 259 branches, RBS ensured it held off any and all attempts by rivals to claim its crown as the nation’s economic bogeyman.

There has been widespread anger and political unrest in the wake of the announcement, almost all of it understandable. The looming closure of the Castlebay branch on Barra, for example, means that RBS customers wishing to visit their nearest branch will be forced to make the crossing to Lochboisdale on South Uist. In a fragile island economy, there are genuine fears that the loss of the bank will have significant repercussions.

Angus MacNeil, the SNP MP for Na h-Eileanan an Iar, has urged Ross McEwen, the RBS chief executive, to visit Barra to witness the fallout first hand. “The public saved RBS, therefore surely they will have the courage to face the same public,” Mr MacNeil said.

Such indignation at the actions of a bank which remains 72 per cent owned by the taxpayer has been a common thread to branch closure announcements. But the almost exclusive focus on RBS risks losing sight of the bigger picture.

Having written sporadically about bank branch closures over the course of 2017, I decided to revisit the issue as the year nears its end and tally up each and every announcement that had landed in my inbox.

The idea was sparked by a study by the consumer group, Which?. The report, published in the spring, projected that a total of 482 branches would be lost in the UK over the course of the 12 months. It seems almost ghoulish to say, considering the amount of livelihoods that have been affected, but in hindsight that figure looks almost welcome.

It staggered me to learn that the total number of branches which closed, or were earmarked for closure during 2017, was almost double that figure.

With 417 closures, RBS alone accounted for nearly the total of the Which? estimate, with HSBC and its 117 closures a distant second. Relatively speaking, the other cuts were more modest: 79 closures by Clydesdale and Yorkshire; 54 by Lloyds; the same number by Barclays; 48 by Yorkshire Building Society, 24 by Bank of Scotland; 22 by Halifax; 29 by TSB; 16 by Santander; and last but not least, 10 closures by the Co-operative Bank.

For the most part, each announcement heralded only minor coverage, but cumulatively, the impact is clear to see. Over the course of 2017, it adds up to an astonishing 870 branches. To make matters worse, that 870 figure includes 178 closures in Scotland, a disproportionately high figure compared to the UK as a whole, and one which will be felt hardest in remote rural communities with unreliable broadband connectivity.

The loss of yet more branches is hardly cause for surprise, but the rate of the network’s demise offers cause for concern. There was a time, not so long ago, when around 300 branches a year were closed, but the losses for this year alone are almost the equivalent of the 1,000 which shut up shop over 2015 and 2016.

There is a commercial inevitability about this trend which cannot be tempered, let alone reversed, by protests or politics, and some of those who have been railing against the banks have chosen to give up their fight. The Campaign for Community Banking Services, which battled branch closures for 17 years, closed itself last year.

“We don’t want people to think they can stop it,” the group’s founder, Derek French, explained. “There’s no hope of changing anything.”

While that may be true, one form of recourse is to look closer at the access to banking protocol. The little-known measure, put in place in March 2015, is an industry-wide agreement in which banks vowed to work with customers and communities to minimise the impact of branch closures. Sir Vince Cable, the then business secretary, hailed it as a “major step forward”.

But in a recent independent review of how the protocol is being applied in practice, and the extent to which banks are consulting with communities affected, Professor Russel Griggs highlighted a range of problems and said banks could “significantly improve” the way they engage and communicate with their customers.

A separate analysis by the Federation of Small Businesses, meanwhile, threw up some disconcerted examples, such as the account from one business customer in Invergordon who tried to open a dialogue with their bank after it announced the local branch was to close.

“We asked the bank to have a campaign to make local customers aware of the mobile banking unit but they refused,” they explained. “They don’t want to because it undermines their decision to move people to other branches in nearby towns.”

That would suggest that the banks, or at least some of them, value PR more than they do their customers, and demonstrates the need for an overhaul of the existing protocol. Incredulously, the existing measure makes no provision for banks to conduct an analysis of the impact on branch closures on economic activity in severely affected areas.

Two years ago, that oversight was remiss, but with the closures coming harder and faster than ever before, it is a failing that must be rectified. There is a hard commercial reality which means the days of a friendly teller on every high street are long gone, but at the very least, we should insist that banks show their workings when deciding which branches are for the chop.