Access to Cash in Scotland Contents

4Bank Branch Closures

34.Since 2015, bank branches have been closing at an average of 70 closures per month across the UK, with Scotland seeing 403 banks permanently shut during this period.70 Scotland has been disproportionately hit by these closures; with Citizens Advice Scotland finding that Scotland suffered 12% of branch closures despite only having 8.3% of the population.71 RBS is responsible for the largest amount of closures, shutting 158 branches since 2015, accounting for almost 40% of bank closures in this time. Bank of Scotland have closed 86 branches, Clydesdale have closed 59 and TSB and Santander have shut down 39 and 38 respectively.72 The breakdown of those closures by local authority across Scotland is set out in the table below:73

Local Authority	Branches closed (2015–19)
City of Edinburgh	54
Glasgow City	41
Highlands	28
Fife	22
Aberdeen City	18
Aberdeenshire	17
Moray	16
Dumfries and Galloway	15
Scottish Borders	15

As well as losing branches some communities are seeing their banks operating reduced hours. TSB announced in April that 72 of its branches across Scotland would have restricted opening times as an alternative to closing large numbers of its branches.74

35.Throughout our inquiry, we heard from members of the public and community councils across Scotland about the significant impact bank branch closures were having on communities and businesses. Branch closures or reduced hours have been linked to reduced footfall on high streets. Cambuslang Community Council wrote to us that since closures

Most businesses have experiences financial difficulties, and they have had major problems with alternative banking facilities. The majority have experienced a loss of trade […] and significant numbers of residents admit they are shopping a lot less on Cambuslang Main Street. The commercial viability of the town centre has suffered.75

Closures mean that customers are having to travel further to access banking services which is both time-consuming and expensive especially for those more reliant on cash including the elderly, those on low incomes and small business owners.76 We heard from Citizens Advice Scotland and Scottish Rural Action that these negative impacts are felt far more greatly in rural areas where there are: fewer branches to start with; less alternative provision such as Post Offices or 24 hour ATM access; accessibility issues due to reduced public transport and weak mobile phone signal and slower broadband speeds making online banking more difficult.77 Rural communities have reacted negatively to the proposals to close their local bank which in some cases has led to protests. For example, when RBS announced their decision to close their branch in Aberfeldy, hundreds of people held a protest highlighting the importance of local branches to these communities.78

36.The impact of losing a bank is particularly is acute when it is the last bank in town. Residents from Lossiemouth wrote to us when it announced that their last bank branch was closing,79and it has since been reported that their community ran out of cash on the first weekend after the closure. Local councillors and business representatives reported that small businesses cannot always afford to use digital payment methods and the phone signal is not reliable and so they were damaged by their customer’s inability to access cash over the weekend. It was also reported that local people had to travel out of the community to a supermarket to make a small purchase to allow them to get cashback.80

37.When we questioned the major banks, they told us that their closures were a response to changes in customer behaviour. UK Finance told us “all banks report significant reductions in the level of activity across their branch network”.81 We questioned banks about whether their closures were driving customer behaviour, rather than a response to them. We were told that closures were not about saving money but responding to lower usage, reduced footfall, fewer services sold in-branch and an increase in consumers choosing alternative ways to bank.82

38.One of the main alternatives to in-branch banking that banks highlighted is the increasing numbers of customers using online and mobile app banking. Santander told us that they are seeing people using digital alternatives reducing needs for cash access from a branch including contactless, Apple Pay and other mobile transactions.83 We heard consistently from the banks that digital ways of banking can be much more convenient for customers, with TSB reporting that 90% of their customers bank with them outside of branch.84 Simon Watson, RBS, told us:

It is true that we now live in a world where a majority of people are very used to going online […] The expectation of banking for our customers is that we follow suit with a similar level of convenience for them.85

39.However, as we have already discussed online banking does not work for everyone. Almost 2 million adults in Scotland never use online banking services and four in five people reported never using a mobile payment system.86 We heard from people all over Scotland that variable and unreliable digital connectivity removed online banking as an alternative for them on the closure of their local branch. For example, we heard from residents of Chirnside that in the Scottish Borders sufficient broadband speeds are only accessible in the largest villages and residents report speeds of below 2mbps if using the internet at all.87

40.Another barrier to online banking is a lack of digital skills. Citizens Advice Scotland reported that 18% of their clients find using a computer difficult and 16% could not use one at all and this is disproportionately the case for vulnerable customers including the elderly and those with physical or mental health problems.88 Consumers also report a lack of confidence in using digital payment systems and online banking feeling more vulnerable to scams and fraud without the option of using their branch.89

41.Online and mobile banking are not the only alternatives proposed to replace in branch banking. Both RBS and Bank of Scotland run mobile banking vans that make stops in communities across Scotland for several hours a week with Bank of Scotland having introduced mobile branches in around one third of the areas that have experienced a branch closure.90 However, as we found in our Report on RBS closures, these vans can be unreliable, require customers to do their banking at fixed times, and provide limited services,91 Mobile banking van users told us that the that limited service, particularly in regards to cash deposits, means it is not an appropriate alternative to a branch for business customers.92 There are also concerns that the vans stops are too short, too centralised to large towns and uncoordinated with local public transport preventing customers from using the service.93 The mobile banks have also been criticised as physically inaccessible for elderly and disabled consumers.94

Role of Government

42.There have been calls for the Government to take a more active role to intervene in bank closures. This was particularly the case following the closures announced by RBS, where some commentators including Scottish Rural Action and the Federation of Small Businesses,95 felt the Government’s majority share in the company meant it should intervene to prevent closures. However, the Government’s consistent position has been that branch closures are commercial decisions for banks. When we questioned John Glen MP, Economic Secretary to the Treasury, about this he did not deviate from this position. Instead his replies focused his positive engagement with the sector and the Government effort to change the decision-making and consultation process surrounding bank branch closures.96

43.We are disappointed that banks are continuing to close branches in Scotland and are concerned by the devastating impact closing bank branches can have on communities and small businesses. We believe that the Government has a role in ensuring communities continue to have access to banking services. We recommend that the Government seek a commitment from banks that they will not close the last bank in town. If such a commitment is not forthcoming we believe the Government should consider further measures, including legislation, to ensure communities still have access to vital banking services

44.The current trends of bank branch closures across Scotland, have led to calls for shared branch facilities or ‘banking hubs’ to be established. This idea was first raised in the Highlands and Islands Enterprise’s Access to Banking Services in Rural Areas Report where they recommended the development of collaborative banking hubs involving partnerships between local authorities, Post Offices, banks, local development trusts and community organisations to combat the loss of local branches and to facilitate access to cash in rural areas.97 Citizens Advice Scotland told us that:

Shared branch facilities would clearly be of interest where they allow banks to maintain a physical presence in a community which would otherwise not be served and could be an opportunity to be a hub with other non-banking services.98

Similarly, Auchtermuchty and Strathmiglo Community Council argued that it should be possible for the banks to cooperate to provide some form of community banking service based in a local community hub.99

45.In March 2019, Lloyds Banking Group, Natwest and Barclays began a six-month pilot of their ‘Business Banking Hubs’ in six urban areas across England including Birmingham, London and Manchester.100 These hubs will allow pre-selected business customers to deposit cash and cheques and exchange coins and notes. Simon Watson, Managing Director of RBS, explained that the system would be largely automated with customers greeted by a contractor (who did not work for any bank involved in the scheme) who would check whether customer needed support using the automated deposit machines.101 Ricky Diggins of Bank of Scotland stressed the limited nature of the services offered by the hubs:

This is a transactional hub. It is not designed to be a full replacement service or bank branch, but we are keen to see if we can make that work.102

We were told that all pilots were in urban locations and there are currently no plans for a pilot of any kind of banking hub in Scotland. The banks, dependent on the outcome of the current pilot, would be open to trialling these business banking hubs in rural locations.103

46.We explored with banks whether it would be possible for these shared provisions to offer a broader range of services, closer to the kind of support that had been envisaged by the original proponents of banking hubs. We heard that several competition and regulatory challenges had already had to be overcome for the current hubs to be piloted and detected little enthusiasm for them to offer more services with the banks referring us to their agreement with the Post Office. They also cited integrating different banks systems and concerns about competition were cited as major challenges.

the Post Office provides a universal access point for customers to then deposit into the banks behind it, if you want to describe it like that. To get all of those banks to come together to create a new platform, essentially, that then becomes a universal platform for all customers would be very complicated. It would be in addition to the Post Office service that is already there. There are some practical barriers to it.104

47.While the concept of banking hubs has potential, the current plans for these hubs fall far short of what is needed as they do not offer enough services to be a realistic alternative to bank branches. We call on the banks to revisit the services offered in hubs and to commit to extending the pilot to a rural location in Scotland. We recommend that the Government is involved in the discussions between banks, so it can address any competition and regulatory barriers to providing an expanded service.

Post Office

48.Throughout this inquiry and the previous inquiry into RBS Branch Closures, we were told by banks that the Post Office was an alternative provider of banking services in the event of a branch closure. In January 2017, the Post Office signed the Banking Framework Agreement to provide nearly all the large banks’ personal customers and small business clients with services including withdrawing and depositing cash and cheques, reviewing balances and offering change facilities. We heard from the banks that 90% of transactions that are done in bank branches can be done in the Post Office105 and over the last year, the Post Office did 135 million of these banking transactions, 85 million of which were cash withdrawals.106 However, the Post Office itself was clear that it did not see itself as a replacement for bank branches, with Martin Kearsley, Banking Director at the Post Office telling us “we do not seek to replicate a bank in all of its functions.”107The Post Office only offers transactional services over the counter and does not provide more complex services such as mortgages and insurance products.108

49.We heard concerns over the low awareness of banking services provided by the Post Office from community councils and members of the public. Craiglockhart Community Council wrote to us that

Many Post Offices offer banking services, but most people seem to be unaware of this. There does not seem to have been much publicity about the services on offer109

To improve knowledge amongst communities of the banking services they now provide, the Post Office ran a trial media campaign in Dumfries, Galloway and East Ayrshire in October 2018. The regional campaign incorporated out-of-home and radio advertising and the local campaign involved local press and a door drop to all homes within a 10-mile radius of a post office. During the same period, the Post Office ran an in-branch campaign to promote awareness of the banking services across all its branches. The Post Office told us that they increased the percentage of those aware of their services from the low forty per cents to the early 50 per cents and acknowledged the value in local events and banks telling their customers more about the services Post Office can provide.110

50.There are concerns surrounding the level of skills and expertise amongst Post Office staff. 47% of adults who were aware of the banking services provided by the Post Office said they were unlikely to use them and 28% were reluctant to do so due to worries about a lack of staff expertise in financial services.111 We have received numerous accounts from the public of practical problems preventing them from accessing banking services at a Post Office including long queues, especially at busy posting seasons, and Post Offices refusing deposits because they have exhausted supplies of deposit envelopes for the appropriate bank.112 Another reoccurring criticism of their banking services is the lack of privacy. Cambuslang Community Council wrote to tell us that their Post Office had been closed and relocated into a grocery store with half the teller units, this made the Post Office significantly busier and incapable of providing privacy to customers.113

51.Another frequently raised concern is about the viability of Post Offices as an alternative to bank branches and the sustainability of the network itself. For example, Bonnyrigg Lasswade Community Council wrote to us saying that:

Our Post Office was shut down as the shop hosting it closed. The Post Office wanted to keep going but has found nowhere else suitable in the town. The only shop left that is big enough to afford it (Post Office staff salaries are paid by the hosting shop) has so far not been able to agree a deal with the PO. We lost an ATM when the Post Office closed.114

The number of Post Offices in Scotland has been declining since 2001, although the rate of closure has been much slower since 2009 as shown in the table below.115

52.The National Federation of SubPostmasters (NFSP) have said that while an increase in banking transactions presents an opportunity to increase footfall and income, “remuneration rates must be fair and appropriate for subpostmasters to effective cater for demand created as banks close.”116 In 2018 the NFSP undertook “observational research” over three days in a branch office where they “timed business banking transactions and compared these timings with the amounts deposited and calculated hourly rates”, based on this work the NFSP estimate that subpostmasters are paid “around £2 per hour for business banking deposits.”117 The NFSP have also raised concerns about:

subpostmasters liability for accepting fraudulent notes, arguing that its unfair for subpostmasters to bear these costs;
the security implication of post offices holding more cash, and
local office lack of capacity to hold large volumes of cash and the impact banking transactions have on customer queues.118

The Post Office told us that through changes to the Post Office’s commercial agreement with the banks that for processing a £1,000 deposit, the sub-postmasters would be paid £1 from October 2019 instead of the current rate of 37 pence.119 However the NFSP believes that this will still be unlikely to cover costs faced by subpostmasters.120 The Post Office also told us that in the vast majority of cases it was the Post Office, not the subpostmaster who bore the costs of any fraudulent notes that were accepted.121

53.When they appeared before us we questioned the Post Office on whether they received sufficient support from the banks, given the extent to which the banks rely on the Post Office as an alternative service provider when justifying branch closures, and whether the Post Office should be “tougher” with the banks.122 Martin Kearsley, Banking Director, Post Office accepted that would be a fair characterisation of the Post Office’s approach a year ago, but that it had taken a more robust approach recently with the replacement of serious of bilateral agreement between banks and the Post Office with the new single standard model.123 He continued that the new agreement should be a major contributor ‘to the improvement of [the Post Office’s] own sustainability.’124

54.The existence of a Post Office is often cited by banks who are closing branches as being an alternative way for customers to access banking services. While they do offer some services, by the Post Office’s own admission they are not an alternative to a bank branch. However, if banks are expecting the Post Office to take on more of the services they used to offer to communities we believe they must properly support the Post Office in taking on these functions.

55.We therefore recommend that the Government broker conversations between the Post Office and high street banks to ensure banks provide proper support and remuneration to the Post Office for taking over several of its functions. This could include: reviewing the level of renumeration subpostmasters receive for providing banking services, offering closed bank branches as possible sites for Post Offices, better promotion of Post Office services by banks and increase support for subpostmasters in identifying fraud.

Regulation

56.Whilst there is no statutory regulation of bank closures, there is a system of self-regulation through the Access to Banking Standard which sets out protocols banks must follow after announcing the closure of a branch:

Inform all customers and stakeholders a minimum of 12 weeks before the closure
Publish and make available an impact assessment of the closure–this must include the banks reason for closure, the foreseen impact on its customers, the date of closure and banking alternatives; how they can be accessed and how the banks will assist in this access.
Provide other bodies/organisations affected by the closure with information on its closure.125

Following the closure of a bank branch, the Standard says banks must continue to ensure that there remains help and assistance, and skilled and competent personnel available to help customers who continue to require assistance.’126 The Standard is overseen by the Lending Standards Board (LSB) which is a self-regulatory body that provides independent oversight of adherence to voluntary standards by registered firms in the financial sector.

57.In our report on RBS Branch Closures we made several recommendations about how the Access to Banking Standard should be reformed calling for:

More comprehensive and branch-specific impact assessments including assessments on local broadband speeds, travel practicalities to get to the next nearest branch and the effective availability of alternative services.
The LSB consult on require banks to consult its customers before final decisions on branch closures are taken and announced.
The LSB should publish its assessments of the banks’ adherence to the Access to Banking Standard to increase public confidence in this self-regulatory system

We also recommended that if self-regulation is unsuccessful, the Government should consult and introduce a scheme of statutory regulation127

58.No changes to the Standard have been made since we published our last report. The LSB told us that the Access to Banking Standard, and their oversight of it, only comes into play once the banks have decided to close a branch and so the LSB have not done a formal consultation on amending the Standard to force banks to consult customers before making a final decision on a closure.128 They said that in their review they have asked banks to improve the level of information that was in their impact assessments but no changes to the Standard itself has been made.129

59.The LSB has not published any specific assessments of the banks adherence to the Standard claiming that it would ‘fundamentally compromise the whole process of the regime of voluntary self-regulation’.130 Instead the LSB produce summary reports which address any issues of non-compliance with the Standard such as inadequate impact assessments or information provision.131 The LSB told us they remained confident that ‘voluntary self-regulation as a concept is working well’.132

60.During our previous inquiry into RBS Branch Closures, the Committee heard evidence from RBS that on closing a bank branch, the buildings would be offered back to communities if there is no other business that wants to open on the premises.133 There is nothing in the Standard to incentivise banks to give their buildings back when leaving a community and it has been reported that since 2012, 60% of buildings that housed bank branches remain vacant damaging local economies. This is particularly problematic in Scotland where only 6% of banks are being re-let to other occupiers compared with 23% and 24% in London and the South East of England respectively.134

61.In our evidence session with John Glen MP, Economic Secretary to the Treasury, the Minister acknowledged the concerns we raised and supported our recommendation for the Standard to require banks to consult with communities before closures are finalised.135 We questioned the Minister on whether there would be Government support for reforming the Standard to include consultation before the finalisation of closures he said:

That is exactly what I think needs to be done […] I think that virtually all MPs are keen to make a constructive intervention to help, not just to campaign against something that they know in their heart of hearts is bound to happen

The Minister also agreed with us that the ‘higher standards of transparency are necessary and desirable’136 and he will seek to address this when he meets with the LSB. The Minister said that he wanted to give self-regulation a chance to improve for consumers before considering statutory intervention but that “all options are always open”.137

62.Throughout this inquiry, we have heard of deficiencies and frustrations from the public on the regulation of bank branch closures and believe the current system of regulation is failing the consumer. We repeat our previous recommendations for

Consultation ahead of closure decisions being taken
Banks to publish impact assessments on the impact of closures on vulnerable groups
The publication of reports in individual closures programmes

We are disappointed with the lack of progress made on these recommendations since our last Report. Furthermore, given the large number of former bank buildings in Scotland that are lying empty after their closures, we believe that Standard should be amended to require banks to consult with communities on possible reuse of these buildings as part of the closure process.

63.We still believe that there is a case for statutory regulation of bank closures. Given the important role that both ATMs and bank branches play in access to cash we are unclear why there is statutory regulation for ATMs but not bank branch closures. We call on the Government to report back on their discussions with the LSB as soon as practicable.. If discussions are not successful we recommend that the Government consult on introducing statutory regulation governing bank branch closures.

70 Data provided to the Committee by Which?

71 AFS 42 based on 399 closures

72 Data provided to the Committee by Which?

73 Which, Bank branch closures: is your local bank closing? April 2019

74 Q161

75 AFS 40

76 Q3

77 AFS 37 & AFS 42

78 The Courier, Aberfeldy residents plan mass RBS protest, 9 January 2018

79 AFS 07

80 The Press and Journal, Cash machines run dry in Lossie on town’s first weekend with no bank branch, June 2019

81 AFS 38