Second supplementary memorandum by Which?
SHARED BRANCH
BANKING PILOT
STUDY
1. Which? is concerned about the impact
of bank branch closures on vulnerable communities. We are one
of the core members of the Campaign for Community Banking Services
(CCBS) along with other groups such as Help the Aged, Federation
of Small Businesses, and New Economics Foundation.
2. The research CCBS members have conducted
suggests that branch closures exacerbate financial inclusion and
have a significant detrimental effect on local economies[352].
In our view, the potential for detriment is further compounded
by the restricted access to free-to-use cash machines in deprived
communities. We submitted preliminary evidence to the Committee's
Inquiry into Cash Machine Charges in December 2004 which suggested
very strongly that many communities which had been identified
as `branchless' also had severely restricted access to free cash
machines[353].
For example, in 41% of the branchless communities we studied,
the closest free cash machine was 4km from the epicentre of that
community.
3. We appreciate that there are commercial
considerations for banks in relation to maintaining a comprehensive
bank branch network. Therefore, we have been keen to find alternative
solutions to deal with the effect of branch closures which address
the detriment consumers face but which also are viable for the
banking sector.
4. Which? in conjunction with the CCBS has
been trying to persuade the banking industry to adopt a flexible
model of shared branch banking (details can be found in the CCCBS's
own submission). We believe this offers a low-cost method of maintaining
access to basic banking services for vulnerable communities with
additional opportunities for providing access to other important
financial services such as generic financial advice and affordable
credit (for example, by working with credit unions). This shared
branch model has evaluated by academics from Loughborough University
Banking Centre and been successfully tried in the USA within the
credit union sector.
5. We lobbied the British Bankers Association
(BBA) to undertake a pilot study to further assess the feasibility
of the concept and to highlight any practical issues in relation
to the operation of shared branch banking. The industry agreed
to carry out a small pilot study throughout 2002.
6. However, as the Committee may know we
were very critical of the design of the pilot study. We set out
these concerns to the BBA in October 2001 before the pilot study
commenced[354] arguing that in effect the scheme was `designed to
fail' and that no meaningful conclusions about the feasibility
of shared branch banking could be drawn from this poorly designed,
limited pilot study.
7. We were encouraged by the view expressed
by the Committee in paragraph 15 of the Fifth Report of Session
2001-02 published in July 2002 which stated that the Committee
`is disappointed by the lack of enthusiasm shown by the largest
clearing banks, and the limited scope of the BBA pilot study'
and that `... the Committee may look further into the matter to
review progress'.
8. In light of the limited nature of the
banking sector's efforts so far to address shared branch banking
(and what we believe is generally a half-hearted approach on the
part of the sector towards financial inclusion), we strongly urge
the Committee to recommend that the banking sector undertake a
proper pilot study into shared branch banking as part of a wider
assessment of the impact of the reduction in basic banking services
on specific vulnerable communities.
9. Which? believes the issue is a relevant
as ever—and indeed as mentioned above the impact of branch
closures is compounded by restricted access to free cash machines.
The Committee's intervention in this matter we believe would help
ensure that the banking sector takes its responsibilities seriously
and encourage a proper evaluation of policy solutions aimed at
promoting financial inclusion.
May 2006
352 Details can be found in the CCBS' own submission
dated January 2006 Back
353
see para 10.7 of Which? submission December 2004. Back
354 We would happy to provide the Committee with
copy of our communications which set out in detail our concerns
about the methodology and design of the pilot scheme. Back
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