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Royal Bank of Scotland branch closures: Government Response to the Committee’s Third Report Contents

Third Special Report

The Scottish Affairs Committee published its Third Report of Session 2017–19, Royal Bank of Scotland branch closures, HC 682, on 27 May 2018. The Government response to the Report was received on 7 August 2018, and is published as an appendix to this Report.


Appendix: Government Response

Introduction

The Scottish Affairs Select Committee published its Report on Royal Bank of Scotland (RBS) branch closures on 27 May 2018. This document sets out the Government’s response to the conclusions and recommendations set out in that report.

The Government read with interest the Committee’s report on RBS branch closures and understands the disappointment felt in many communities when a branch closes. It is therefore right that the Committee would probe RBS’ branch closure programme to better understand the reasons for the decisions taken by RBS and the steps taken to address customers’ concerns.

While the Government welcomes the innovations banks are introducing to respond to changes in customer behaviour—as more of us choose to bank on demand online or via an app rather than visit a branch—the Government also believes that the impact of branch closures on customers must be understood, considered and mitigated where possible. Government maintains it is imperative that customers, wherever they live and especially the most vulnerable, still have access to face-to-face banking services.

At the same time, however, the decision to close a branch is a commercial decision for the management team of the bank, and Government policy is not to intervene in those decisions. This policy applies equally to the closure of RBS branches as it does to any other bank. Although RBS is currently 62.4% state-owned, Government’s stake is managed at arms-length by UK Government Investments (UKGI) and Government is not involved in strategic, commercial or operational decisions, including branch closures.

In order to achieve the balance between commercial flexibility, which is so vital to the success of our economy, and protection for consumers, which ensures they get a fair deal, the Government supports two vital industry responses to branch closures: the Access to Banking Standard and the Post Office Banking Framework Agreement.

The Committee heard that the Access to Banking Standard is an industry agreement which asks that banks notify communities at least 12 weeks before a closure takes place and produce an impact assessment which clearly explains the decision for the closure. The Standard also requires banks to make clear to customers the alternative options available to continue to access their banking services. This should include provisions for the most vulnerable customers. The Access to Banking Standard is monitored and enforced by the independent Lending Standards Board (LSB).

The Committee also heard about the Post Office’s Banking Framework Agreement with 28 high street banks, which enables 99% of personal banking customers and 95% of small business customers to carry out their everyday banking at one of the Post Office’s 11,500 plus branches.

Both initiatives have the Government’s full support, and banks are aware that the Government expects their involvement to be genuine and unqualified. Government will always continue to monitor the effectiveness of these policies to ensure they are delivering for consumers.

The majority of the recommendations made in the report are for RBS or the Lending Standards Board (LSB) to consider. The Government’s response addresses only those recommendations for Government.

Recommendations and response

1.If RBS does not act on our recommendation to halt the closures we recommend that the Government use any influence that its majority shareholding provides to apply pressure on RBS to reconsider the closure programme. (Paragraph 41)

The Government disagrees with the Committee’s recommendation.

Governments should not be in the business of owning banks; nor should they intervene in the commercial, operational or management decisions of business. These decisions are rightly the responsibility of Boards and management teams, who are best placed to set strategy and commercial direction and to make day-to-day management decisions. RBS was recapitalised to prevent its collapse, protecting economic stability and people’s savings. The Government’s objective is to return the RBS shareholding to the private sector when it represents value for money to do so. To facilitate its return to private ownership, the Government’s stake in RBS is managed at arms-length and on a commercial basis by UK Government Investments (UKGI). The Government does not intervene in any commercial, management or operational decisions relating to RBS, including on the future of the branch network. Due to the nature of these governance arrangements, it would be inappropriate for Government to seek to influence the day-to-day management of the bank branch network.

However, Government ministers and officials do meet regularly with financial services firms as part of the regular process of policy development. In light of its importance to consumers, access to banking services is one of the topics regularly discussed.

2.We recommend that the Government monitor the effectiveness of the LSB as the guardian of the Access to Banking Standard. If the LSB is unable to maintain public confidence in the current regime the Government should consider intervening and consult on introducing a scheme of statutory regulation. (Paragraph 60)

The Government partly agrees with the Committee’s recommendation.

Government recognises that branch closures can be difficult for the customers affected and urges the banks to consider these sentiments when making decisions on their branch network. As such, Government makes clear that banks and building societies who have voluntarily participated in the Access to Banking Standard should do so genuinely and with the spirit of the agreement, not just the letter, in mind.

The LSB is an independent organisation which took on responsibility for monitoring and enforcing the new Access to Banking Standard in July 2017 following Professor Russel Griggs’ review of the Access to Banking Protocol.

Government welcomed the LSB’s oversight of the Standard, when it was introduced by industry in July 2017, and considers the scheme to be working effectively at present. The Government agrees that it is imperative that the Access to Banking Standard delivers for customers so the Government will continue to keep a close interest in how these arrangements bed in.

However, the Government does not believe there is a case for introducing a scheme of statutory regulation. Commercial firms are best placed to make commercial decisions. Having the flexibility to respond to changes in the market is what makes the UK’s financial services sector one of the most competitive and productive in the world. The Government makes no apologies for wanting to protect that.

The Government cannot reverse the changes in the market and in customer behaviour; nor would it be appropriate for Government to determine firms’ commercial strategy in response to those changes. However, Government will continue to monitor the effectiveness of the Access to Banking Standard, and LSB oversight of it, to ensure that it continues to strike the right balance between providing commercial flexibility and consumer protection.

3.We recommend that the Government, Post Office and Royal Bank of Scotland work together to improve awareness of the bank services offered by the Post Office. (Paragraph 83)

The Government strongly agrees with the Committee’s recommendation.

At Autumn Budget 2017, the previous Economic Secretary wrote to UK Finance and the Post Office to request that they set out a plan to increase publicity of these vital services.

In February this year, the Post Office and UK Finance wrote to the current Economic Secretary setting out detailed plans on how they will achieve this (see Annex A). They plan to launch these activities in the Autumn of this year. Government will monitor these activities very closely, particularly the planned evaluation, in order to assess their effectiveness.


Annex A: Five Point Plan for Banking Services at the Post Office

Our Shared Vision

Customers are aware that they will receive a quality day-to-day banking service when using their local Post Office.

Our Five-Point Plan

(1) Actions to raise awareness of banking services available at the Post Office

(2) Actions to support specific communities

(3) Promotion of the Post Office as an integral channel for day-to-day banking

(4) Enhanced support for vulnerable consumers

(5) Ongoing monitoring

Specific Plans

1.

Actions to raise awareness of banking services available at the Post Office. We intend to undertake parallel pilots in two different areas, using Post Office promotional materials, both a regional campaign and targeted localised campaign, to inform further potential media approaches for those who would benefit most:
  • A trial regional media campaign (including print and outdoor) in the North West of England identified because it is considered broadly representative of the wider UK population
  • A trial local media campaign (including print and outdoor) in a specific location with a higher proportion of vulnerable customers and lower concentrations of bank branches, identified as having greater customer need, defined by:
    • Assessment of the population that lives more than 3 miles from a bank branch
    • Proportion of population living in top 20% of the country’s most deprived areas
    • Demographic profile of existing Post Office users (by age and socio-demographic)

Q3/4 2018
  • Post Office in-branch campaigns across 9,000 locations currently scheduled between September and November 2018 and in early 2019

Q3/4 2018 & Q1 2019

2.

Actions to support specific communities, including those impacted by branch closures. We will undertake further activities across the UK that support communities in areas with lower concentrations of bank branches with a range of “tools” to drive awareness of the Post Office to access bank accounts locally.
  • Post Office branded leaflets to be made available in local community hubs, for local authority mail-outs and in closing bank branches

    “Access to day-to-day banking services at the Post Office” leaflet listing parties to the Branch Framework, for use in local community centres hubs (e.g. libraries, GP surgeries, constituency offices, Citizens’ Advice offices, etc.)

Q3 2018
  • Joint Post Office and bank outreach to communities to explain and promote the services available. This activity will be provided and made available on demand through a “Dear Colleague” offer to MPs for their constituencies as well as community stakeholders. Includes MP drop-in sessions in parliament

From Q3 2018
  • Improved collaboration between Post Office and banks during the branch closure process
    • Joint bank and Post Office pre-closure events
    • Senior management improving coordination and collaboration of handovers

From Q3 2018

3.

Promotion of the Post Office as an integral channel for day-to-day banking. Reference to the availability of the Post Office counter service in banks’ customer-facing collateral, using Post Office branding to maximise awareness.
  • Bank literature and websites to provide clear prominent information on Post Office banking services, using Post Office branding to maximise awareness
    • Explaining specific functionality (per Branch Framework) and where services outside the scope of the agreement can be accessed

Q3 2018
  • Links to the Post Office branch locator (which will also include Post Office mobile branch routes) to be included on banks’ websites

Q3 2018
  • Telephony channels will reference Post Office locations where appropriate
    • Identifying key “triggers” (e.g. local branch closure; length of journey, etc.) and signposting to help customers to understand specific functionality (per Branch Framework) and where services outside the scope of the agreement can be accessed

Q3 2018
  • Permanent signage at Post Office outlets to be refreshed to promote Branch Framework

Q3 2018

4.

Enhanced support for vulnerable consumers with Citizens’ Advice, who we have identified are more likely to use the Post Office, developed with support from Citizens’ Advice, using their customer journey methodology.
  • Adoption of Good Practice Guidance to supplement the Access to Banking Standard and developed using the Citizens’ Advice customer journey mapping:
    • Identifying a need to transact and establishing where
    • Planning and travelling to the access point
    • Entering and moving around inside the access point
    • Being served at the counter

Q3 2018
  • This might include:
    • Advice re: transport locally
    • Accompanying certain customers to their nearest Post Office
    • Introductions to local Post Office
    • Customer support re: alternative ways to bank

5.

Ongoing monitoring of awareness and confidence in the Post Office counter service, with tracking of both trial campaigns to inform any further potential media approaches for those who would benefit most.
  • Expand existing trend surveys (Charterhouse/GFK) by adding relevant questions that mirror those in the Post Office, yougov survey, with an initial baseline for the trial media campaign areas. Banks and the Post Office to work together to shape the correct questions, focusing on the customer’s likelihood of using the service once they are aware, rather than confidence

From Q3 2018 to coincide with media activity


Published: 7 September 2018