Examination of Witnesses (Questions 99
WEDNESDAY 1 MAY 2002
99. Thank you very much for coming today, and
particularly for presenting your Memorandum to us. Can I ask you
to introduce yourselves for the Hansard writers.
(Mr Murphy) Joint General Secretary, UNIFI, the preeminent
finance sector union in Britain.
(Mr Earls) Joint Head of Research, UNIFI.
100. Welcome. One of my colleagues said sotto
voce that is a long time since we have welcomed trade unions,
so doubly welcome to the Committee. Can I start off by asking
you about the role of bank branches and if the cost of fair banking
for SMEs and if that means less bank branches and a possible decline
in quality of service?
(Mr Murphy) If I can start off, my colleague
may come in with some other bits later. We are particularly concerned
in all of these matters because our members, uniquely, have three
shareholdings, if you like, in the concerns: they are employees;
they are customers; and they are very often shareholders as well,
so it is a very important issue for us. We have been concerned
for some time at the reduction in the number of branches that
there are, not only from the primary function of the Trade Union
to protect their members' jobs, but also for the impact that it
has on service for customers, whether they are individual customers
or SMEs. It is our belief that the cuts that we saw through the
latter part of the 1990s, there was a lot of hullabaloo in the
press when Barclays, for example, closed 170-odd branches in one
dayI think incidentally they were just unlucky that they
got in last. I do not think they were any worse than anybody else,
they just got the worst of the publicity. We found that the public
pressure and we hope the pressure that we have brought, and, to
some extent, pressure that has been brought on by parliamentarians
as well has slowed that number of branch closures up. It still
leaves a big problem for people, particularly in rural communities
who have been unable to get to local branches for information
and advice, and we think that there is a real issue that still
needs to be addressed by banks and financial institutions. They
do not always appreciate, I think, the difficulties and problems
that some people do have in doing their banking. Some people,
believe it or not, even today, are still frightened of going into
banks, are still concerned about going to talk to people about
their finances. They are not sure what they are entitled to ask
about, whether they will be told off for doing things in a particular
way or whatever. There is a generational issue here as well, that
older people in particular like to talk to somebody face to face.
Younger people become a little bit concerned, and I think SMEs
as well about the confidentiality of going to one branch in a
location that might be some distance away. Branches are all very
trendy and open plan now, and that is not always the best way
for people perhaps to sit down and talk confidentially about their
business, so there are a number of issues there that we have had
some concern about for some time which we still do not think are
101. But with the quite rapid growth of telephone
banking, internet banking services, you accept that there is going
to be a medium term programme of branch closure, is there not,
simply because the way people want to do their banking, business
is going to reflect the way they live their lives and they will
not want to make a physical journey to access their bank, they
will do it electronically?
(Mr Murphy) Contrary to public opinion we are not
dinosaurs, we do understand that there is change going on all
about us, and our role has always been to be at the centre of
that change process. We want to be involved in that change as
well but change must take into account all of the stakeholders,
not just profitability. I remember when RBS were making their
bid for Nat West, and one or two other players were floating around
on the outskirts of that, it seemed to be the person who was going
to get the prize of Nat West was that predator who was going to
sack the most people. It seemed to be predicated on how many branches
you close, how many people you get rid of. We recognise that people's
banking and financial servicing habits have changed, we have recognised
that, but they have not changed so much so rapidly that people
do not want branches at all. People want to be able to access
the service of their choice by the route of their choice, not
being driven into a particular route of service that perhaps the
financial institutions want, so we do recognise that there will
102. But I think you are accepting, from what
you say, that the trend, if anything, is going more towards telephone,
electronic and away from branch visits?
(Mr Murphy) For certain elements of people's banking.
The banks have made it easier for people to transact business
on the phone, the banks have allowed that to happen. We must not
forget that 30, 40 years ago, there was only a few things that
we could do with our bank accounts. I am old enough to remember
the first little hole in the wall card that you could get, from
Nat West, as it happens, and it allowed you to take £10 out
of your account. Why not £5, why not £15? The bank were
determining what service you could have at what time and the banks
still continue to do that to a certain extent but consumer pressure
has made it clear on banks that they have to do things differently
quicker, and people will access through the internet, through
telephones, but they also want the ability, on occasion, to go
to a branch, they do not want to see branches done away with completely.
103. I do not think anyone is suggesting that.
I am just trying to draw out of you what your view is on what
you hope for in terms of the programme of branch closures. It
seems to me that the present number of branches is not going to
be sustainable over the medium and long term because of the changes
in the way people want to do their banking, just matching their
banking with their lifestyle. So what sort of criteria are you
looking to see banks use when they do make decisions in the future
about branch closures?
(Mr Earls) I would also make the point that it is
useful to make a distinction between customer demand and, to a
certain extent, customer engineering, how much there is a demand
for some of these new services. The key thing is people do want
choice, depending on the type of service that they want to conduct
and the type of individual that they are. Clearly there needs
to be a range of distribution channels and that includes bank
branches. We have heard already from the Federation of Small Businesses
that some of the advantages of a bank branch is the "valued
added" that can be added to the nature of the service and
I think that is something that the banks themselves are increasingly
starting to recognise.
104. I think we are making a perfectly valid
point about small businesses. I can see that anyone who has a
fairly complex relationship with their bank will want physical
contact with them and to interface with another human being. The
large proportion of people who are just ordinary account holders,
the payment in is automatic, most of the payment out is automatic,
you do not need to make many branch visits and if you can do it
on a Sunday and sort your account out at home on the computer
that is a huge attraction, is it not?
(Mr Earls) It is for some customers.
105. But is that not going to be a growing proportion?
(Mr Earls) Indeed, yes. But the point I would make
is that more consideration needs to be given than has been the
case thus far as to the effect that particular branch closures
may have and also into the way in which branch closure programmes
are carried out.
106. One possible option that might help address
some of your concerns about branch closures was the notion of
shared branches. Perhaps in rural areas, for example, smaller
towns, this might be a way forward. Can you clarify your view
on this because in your submission to us, paragraph 32, you say,
"The shared branch proposal is welcome", but then you
go on to make three quite powerful criticisms of it, so I do not
really know that I understand what you think about this option.
(Mr Earls) Clearly, where there is a facility to share
a branch and have access, that is better than having no access
at all, and also we would want to encourage the industry to look
at a range of options that it could explore to help address some
of these problems concerning physical access. That said, it would
be remiss of us not to point out what some of the problems and
concerns that we have in this area.
107. I think you are saying that you see this
as something that is going to happen, and if it does happen -
(Mr Murphy) It is happening.
(Mr Earls) We welcome the initiative. The British
Bankers Association have already started a pilot, looking at the
shared branch concept. We welcome that initiative, although we
do have some concerns, which are outlined in our submission about
that pilot. The point is that that pilot exercise, which is only
taking place in ten places, needs to be monitored and evaluated
very carefully to determine whether it meets the objectives to
which it is supposed to address.
108. Can I ask you, as I asked the earlier witnesses,
about Universal Banking and basic banking services. In your Memorandum
I think you comment on Universal Banking and you make some rather
interesting points about some of the dangers here, that some of
these new entrants might cherry-pick particular types of customer.
What is your view on this? Are there people who might use the
Universal Bank who would not want the basic banking service. Are
they different types of people?
(Mr Murphy) It is not just a question of people who
would not want the basic bank accounts, people who cannot get
the basic bank account are really the people that are going to
use the Universal Bank. A cynic might say, "The reason why
it has not taken off so well now is because it is not a very profitable
area of the market", which is why, perhaps, there has not
been the push on it, but there are a number of people in this
country who cannot access basic financial services and that is
something that we all ought to be aware of. There is a role for
banks and financial institutions to provide basic accounting for
109. But if that is true, you are suggesting
it should be done by the banks and the onus should be on them?
(Mr Murphy) Yes. They have a social responsibility
as well as the rest of us.
110. So do you not see a slight danger in a
separate service being set up called Universal Banking in the
(Mr Murphy) Universal Banking is not just about social
exclusion, there is also the role of the Post Offices and the
survival of Post Offices in rural communities, so there are a
number of important issues there. But at the moment, there are
a number of people, I cannot remember the figures offhand, but
there are many millions of people who cannot get basic banks accounts
as the system stands now. With a Universal Bank, they will at
least have a chance of getting something that will give them a
bank account of some basic nature.
111. So you would rather see that happen than
the banks widen out their basic banking services?
(Mr Murphy) I think that debate is finished, with
respect. The banks have decided over the years they are not going
to do that, and this is a solution that we have come up with as
a nation to provide a response to that particular problem, and
I think that is the position that we find ourselves in.
112. On the Universal Banking, you point out
a number of the difficulties, you know, that the Post Offices
themselves might be closed in the fullness of time, there is a
lack of privacy, implications for security and so on. Do you think
those issues are resolvable.
(Mr Murphy) I think they are if we all play a part
in trying to resolve them. We have tried to outline in our Memorandum
briefly some of the more practical issues as well. But yes, I
think those problems are resolvable, but I think the main bulk
of the solution to those problems will remain with the banks themselves.
Some Government pressure and cajoling has helped to get the Universal
Bank established as a principle, but the cajoling has probably
got to continue a little bit more in order to get them up and
running. There is a danger that you end up with a two-tier banking
system. That is something that we would be very concerned about.
113. Are you involved in helping the government
or Post Offices in how the Universal Banking system might actually
(Mr Murphy) We have, in the past, made submissions
as to what our view would be and we have had meetings with ministers
about it and we cooperate with other organisations who are involved
in say the Post Office or in the provision of the service.
114. Turning to the Banking Code, the Banking
Code at present is there on a voluntary basis. Do you believe
this is an adequate form of regulation, this self regulation?
(Mr Earls) I think it should be acknowledged that
there have been some significant improvements made in the Banking
Code. We highlight in our submission some of the concerns we have
about the voluntary nature of the Banking Code, concerns which
are held by some consumer groups, not least, the National Consumer
Council, in their submission to the review of the Banking Code,
highlighted a number of concerns which we would share. One of
the problems of the voluntary nature is that the Code is not universal
so therefore it does not actually apply to all banks. Although
the majority of banks sign up to it, not all banks do.
115. Is the number that do sign up not significant?
(Mr Earls) I think the majority do sign up, but there
are some very high profile brands which are not signed up to the
Banking Code. So if you are looking at commitment to things like
financial inclusion, which is an industry problem, one has to
ask the question, "How do you encourage all of the industry
to address that?" The other issue of course is on the Voluntary
Code is to do with monitoring and compliance. How do you ensure
that people comply with the Code and for those who do not comply,
what are the sanctions which would be put in place.
116. What is UNIFIs view of these matters? Are
you of the view that it ought to be made stronger, and if so,
in what respects?
(Mr Earls) The Code needs to be made stronger if you
are going to make it a universal Code. If it is voluntary you
cannot ensure that you get that universality. The other areas
where the Code can be improved would relate to some of the issues
that are addressed in the Code, one of which again we highlighted
in our submission, relates to the extent that the Code deals with
the process of bank branch closures.
117. Do you think it deals adequately with the
things that actually concern particularly small and medium sized
(Mr Earls) Where branch closures are concerned and
small businesses have highlighted the importance of branch closures
to them we would say no.
118. On that point, what would you want it to
say on the question of branch closures?
(Mr Earls) We would want to see greater consultation
with all the people who have an interest in the running of a branch
as to why the branch is being closed and to what some of the consequences
(Mr Murphy) We are quite impressed with the American
Community Reinvestment Act. We are not saying it could be transposed
here, I think that would be wrong, but there are elements of that,
the consultation with people in the community et cetera and justifications,
that is something that we think might be able to be fitted to
this particular problem, and we have mentioned it in our Memorandum.
119. Have you put that forward to the Government
from the Union?
(Mr Earls) In a number of submissions.