LONDON — A Labour government would ban banks from closing high street branches unless it can be proven the closures would not harm the local community, the party’s shadow chancellor will say on Friday.
John McDonnell will spell out plans to give regulators the powers to block closures as hundreds of branches across the country face the axe.
McDonnell will point to figures suggesting more than 1,000 high street banks have closed in the past two years, despite government policies designed to stem the flow of closures.
“High street bank closures have become an epidemic in the last few years, blighting our town centres, hurting particularly elderly and more vulnerable customers, and local small businesses whilst making healthy profits for themselves,” he will say.
“It’s time our banks recognise instead that they are a utility providing an essential public service.”
The coalition government agreed an ‘Access to Banking Protocol’ with major banks in 2015. The agreement was intended to prevent banks from closing branches unless “suitable alternative provision” was provided locally.
However, the number of closures has continued to grow with 2017 on course to see record numbers of closures.
Under Labour’s policy, the Financial Conduct Authority will be given powers to prevent closures unless five criteria can be met, including that the “closure of the branch must not make the local community worse off.”
- Prior to the closure of any branch, banks must undertake a consultation with all customers of the branch which it proposes to close. It must also consult representatives of the relevant local council.
- The bank must publish details of the reasons for closure, including financial calculations showing the revenues and costs of the relevant branch. The share of central costs (e.g. accounting systems, IT, cyber security, personnel function) allocated to the branch must be separately identified, especially many of these costs are relatively ‘fixed’ and are not proportionate to the number of branches.
- The consultation process must be overseen by the FCA, and the FCA must ensure that the closure of the branch does not degrade the local financial infrastructure. The closure of the branch must not make the local community worse-off.
- The FCA’s approval will be needed for any branch closure.
- Upon approval by FCA, customers and local communities must be given 3 months’ notice to enable them to make appropriate arrangements.
Emeritus Professor, Prem Sikka from the University of Essex, who advised Labour on the policy, said: “Banks receive considerable financial support from the public and in return should be required to provide financial infrastructure that meets the needs of individuals and businesses.”
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