Debate of the Week – Rural Bank Closures

28 Sep 2016 Ryan Miller    Last updated: 4 Oct 2016

Illustration by Patrick Sanders
Illustration by Patrick Sanders

Week three of our new eye on Stormont’s plenary sessions and we look at the SDLP’s motion on rural bank closures.

The Bank of Ireland recently announced a further raft of bank branch closures, carrying on a trend from recent years.

The SDLP have long condemned these moves and, on Monday, Richie McPhillips brought this Private Members’ Bill forward on behalf of himself and party colleagues:

That this Assembly is extremely concerned at the number of bank branches that are being closed in rural areas; is alarmed that large rural areas are without access to a local bank branch; recognises the limitations of many of the alternatives, such as mobile and internet banking, and the Post Office; believes that the provision of accessible banking is an integral part of social inclusion, with a particular impact on the elderly; notes the negative economic impact bank closures have on small businesses and on future investment opportunities; and calls on the Minister for the Economy to intervene meaningfully and encourage the banking sector to maintain a strong network of rural bank branches and to safeguard the existing bank branches within these communities from closure.

The new MLA said that continuing closures have been a problem for both people and businesses in rural areas, and used a recent Bank of Ireland announcement to illustrate his point.

“Despite promises of no more bank closures in 2013, on 20 July this year, the Bank of Ireland announced that it will close eight branches in Castlereagh, Draperstown, Antrim, Belleek, Castlederg, Newtownards, Maghera and Donegall Square South in Belfast.”

He added that branches can be a “lifeline” and “a major part of the fabric that supports the vast majority of financial activity” in rural areas, before challenging the Bank of Irelands rationale for the closures.

“In its statement, it mentions alternative banking and how important it is to move online. When pressed on the issue, however, it became clear that the bank has made no assessment regarding access to Internet and mobile phone services. I know at first hand that there are many people in Belleek who do not have a stable Internet connection. The bank has made no assessment of what impact its decision will have on older people, who may not be tech savvy and may not be able to use computers. That simply cannot be acceptable.”

Amendment

Mr McPhillips called for the chamber to “send a direct message to… wider banking services” that erosion of services will not be allowed and even suggested “a reduction in corporation tax and having social clauses in which there must be a commitment to rural banking services in order for banks to avail themselves of any tax break”.

Ahead of Sinn Fein’s proposed amendment, he said the issue “is much greater than connectivity” and so he could not support their changes.

Caoimhe Archibald, for SF, begged to move:

Leave out all after "Office" and insert
", particularly given the limitations of broadband and mobile Internet provision in rural areas; believes that the provision of accessible banking is an integral part of social inclusion, with a particular impact on the elderly; notes the negative economic impact bank closures have on small businesses and on future investment opportunities; calls on the Minister for the Economy to intervene meaningfully and encourage the banking sector to maintain a strong network of rural bank branches and to safeguard the existing bank branches within these communities from closure; and further calls on the Minister to commit to investing in identifying and addressing the problem of rural areas where no, or no worthwhile, broadband and mobile provision can be received.".

She said this added “to the spirit” of the motion, “ensuring the equivalence of service delivery for rural dwellers”, before agreeing with many of the points previously raised – although warning that recent changes in people’s banking habits “cannot be ignored”, even if simply closing branches is not a solution.

A recent Federation of Small Businesses presentation to the Economy Committee was also noted, where the FSB said the ability to deposit cash was crucial to rural SMEs in beating crime, she added.

Consensus

There was not significant deviation from the points raised. The DUP’s Thomas Buchanan said such closures are an emotive issue that “instils fear” in local people because “it is another loss in a rural area”, as well as reducing local footfall and thus hurt SMEs.

The UUP’s Rosemary Barton said banking may be changing in nature but it remains crucial that larger villages have at least one branch. She also asked what has been done by branches that have seen closures from competitors in their village to attract customers who might feel let down by their own bank.

Alliance’s Kellie Armstrong said she supported the motion and amendment, and that partial solutions such as banking in post offices are unwelcome because many “do not want to discuss personal banking requirements over the post office counter, especially when that counter is in the garage forecourt where their neighbours are next in the queue waiting to buy their milk.”

She added: “The pace of bank closures has accelerated rapidly over recent years. The British Bankers' Association (BBA) investigated lending data and found that bank closures dampen SME lending growth by 63%. That figure rose to 104% in areas that have lost their last bank. That is a significant and damaging drop in funding for areas that are already under commercial and economic pressure.”

The question was raised of whether this represents “market failure”, while noting that UBS predicts “another 50% of banks in the UK [will] close in the next 10 years.”

Minister’s view

Economy Minister Simon Hamilton welcomed the debate despite the fact that banking is a reserved matter, before saying individuals’ changing relationship with banks cannot be ignored.

“Recent data from the British Bankers' Association (BBA) shows that the number of bank branch transactions across the United Kingdom has fallen to an average of four per customer per year. The BBA calculates that the average branch in the UK receives 71 visits per day: that is a 32% fall since 2011. 

“I raise those issues not with the intention of sounding like a spokesperson for the banks — I have a tough enough job without taking that one on — but because, as many Members have acknowledged, we are changing our behaviour in how we interact not just with banks but with a range of services, such as retail and government services.

“The BBA also showed that there had been a 50% rise in banking app logins, to 11 million per day in 2015. The Bank of Ireland, which is understandably in the eye of the storm in today's debate because of its recent announcements, suggests that as few as 2% of customer transactions are now done in-branch, that there has been a 20% increase in online customers in the past two years and that, two years ago, 70% of mortgages were sold directly via branches or on the phone. That has now flipped the other way, and now 70% are sold via mortgage intermediaries, without interaction in branches at all.”

However, he stated that branches have an “essential” role in our high streets, and efforts must be made to increase consumer confidence and capability. He also said his department is working hard to increase broadband connectivity in NI.

Both the amendment and the motion, as amended, passed.

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