Politicians condemn 'quiet scandal' of British bank closures

LONDON (Reuters) - British politicians have urged banks to provide more services in poor areas after a Reuters article showed the largest are disproportionately closing branches in the lowest-income areas while expanding in wealthier ones.

Office lights are on in banks as dawn breaks behind the financial district of Canary Wharf, in London, Britain June 24, 2016. REUTERS/Neil Hall

The analysis published last week found more than 90 percent of the branch closures were in areas where the median household income is below the British average of 27,600 pounds ($36,600).

“The research is very worrying and I hope the Treasury are aware of it,” James Heappey, a Conservative member of parliament (MP), told the House of Commons in a debate on Thursday.

“It is important to make sure that (banks) are not focusing their branch network on the areas where they can make the most cash, when the nation collectively bailed them out not too long ago,” he said.

Britain's biggest banks, HSBC HSBA.L, Barclays BARC.L, Royal Bank of Scotland RBS.L and Lloyds Banking Group LLOY.L, have been steadily shrinking their branch networks to cut costs while investing in online and mobile banking services.

MPs in the debate said Britain should consider emulating the United States in requiring banks to maintain branches and lending in poorer areas.

The U.S. Community Reinvestment Act of 1977 is designed to reduce discriminatory lending by requiring banks to lend in communities where they are chartered. The U.S. law can block the opening of new branches elsewhere if a bank does not comply.

Slideshow ( 2 images )

The major banks have all said they close branches based on declining footfall, as consumers move to online banking, and that they study the impact of such closures carefully.

RBS, Lloyds and Barclays declined to comment for this story. A spokesman for HSBC said the bank has launched a digital service that allows small businesses to apply for loans without visiting a branch.

Christian Matheson, a Labour member of parliament, said the Reuters study, which covered the year to April, showed a crisis.

“There can be no more cavalier closures of bank branches, which in turn damage the local economy,” Matheson said.

“In 2008 we apparently learnt that some big banks are too big to fail. Perhaps the message today is that some local banks are too important to local communities to close.”

MPs called in the debate for banks to share branches in smaller communities, and to be more transparent about closures.

Closures have more than halved lending growth to small businesses in the areas affected, separate research released on Thursday showed.

Campaign group Move Your Money estimated lending growth to small local businesses was down by 63 percent in towns and villages that had lost a bank branch. A spokesman for the British Bankers’ Association (BBA) said banks have signed up to protocols aimed at minimizing the impact of branch closures, including partnering with post offices to offer services and carrying out impact studies before closures.”Banks are determined to leave no one behind,” he said.

But MP for Tottenham David Lammy said banks were using their Access to Banking Protocol as a ‘Trojan horse’ to distract from closures.

This “is a quiet scandal and tragedy taking place across our country,” Lammy said in Thursday’s debate.

Britain’s vote last week to leave the European Union has potentially triggered the biggest upheaval for banking since the 2007-2009 financial crisis, raising risks of recession and earnings downgrades that hit bank shares.

Editing by Sinead Cruise and Ruth Pitchford