MPs warning

Banks ‘closing branches ahead of law on cash access’

Aberfeldy bank branch closure
Banks are closing branches at an accelerating rate (pic: Terry Murden)

Banks have been accused of rushing to close branches ahead of legislation ensuring consumers can access cash and banking services.

MPs on the Scottish Affairs Committee warns in a report published today that half a million Scots risk being forgotten by banks due to the unprecedented rate of closures.

Since 2015, 53% of Scotland’s bank branches have closed, which represents the highest percentage loss across the UK’s four nations. 

The Post Office has filled the void of many banking services within communities, but the committee says it is deeply disappointing that Scotland has seen the highest percentage of Post Office closures anywhere in the UK.

In recent years, its offering of banking services has grown, and now offers customers more services than ever before, with the recent renewal of the Banking Framework Agreement. The committee recommends that a long-term commitment is sought from banks to maintain appropriate banking services for their customers using the Post Office network. 

From difficulties adapting to a society built on digital payments, to older people on lower and fixed incomes using it as a budgeting tool, many people opt to use cash for a number of reasons.

However, the committee raises concern that not enough support is being offered to support these individuals as the UK transitions to an increasingly digital society, nor has adequate research been undertaken to understand the full implications of such a move. 

The committee welcomes the UK Government’s introduction of its Financial Services and Markets Bill, which includes added protections on access to cash.

The Treasury Minister at the time, John Glen, when appearing before the committee, recognised the need for a more detailed picture of cash usage in Scotland.

The committee said it is concerned that the rapid rate of bank branch closures may be as a result of banks rushing to close branches before legislation can take effect to protect access to cash and banking services. 

In addition to Government legislation hoping to support access to cash, there have also been a number of voluntary agreements championed within the sector.

Pete Wishart: access to cash has been decimated

This includes LINK’s Financial Inclusion Programme, which provides free access to cash via free-to-use ATMs in the most rural and deprived areas of the UK. The committee is of the view however that this should not be left to a voluntary agreement which leaves it vulnerable. It says future legislation should complement industry-led initiatives to guarantee free access to cash.

Scottish Affairs Committee chair, Pete Wishart, said: “Access to cash across Scotland has been decimated in recent years, leading to Westminster  committees investigating the issue multiple times.

“While the move to digital banking and payments has offered a method at which to do transactions that many of us enjoy, we cannot forget the 500,000 people in Scotland who rely on cash in their day-to-day lives.

“With the cost-of-living crisis deepening, many people are using cash for budgeting. But what is deeply worrying is that bank branches are closing at a record rate with very limited research or thought conducted of the possible widespread implications.”

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He added: “Since the predecessor committee’s inquiry considering this very issue, it is welcome that the Government is legislating to protect access to cash.

“However, this positive announcement is beset by the risk that banks may close their doors before legislation on this matter comes into force.

“We are aware of the commercial considerations affecting banks, which has played a role in the recent increase of branch closures. We welcome the effort taken by the banking industry to protect access to cash, although we still feel that there is a clear need for legislation. 

“In our report today, we are calling for more research into the implications of a cashless society and more secure and longer-term agreements to ensure the continued access to cash. The Government appears to be in listening mode on this issue, and I look forward to its response in due course.”

Banks insist that branches are only closed in response to customer demand and the switch to digital services. A number of banks have also provided mobile services, particularly in rural areas.

Worries over personal finances grow

According to a survey, 85% of Scots are worried about the impact of the cost of living on their personal finances.

TSB’s Money Confidence Barometer shows that half (49%) are concerned about rising fuel and energy costs, while 23% fret about paying for household groceries.

Nearly one-fifth (17%) say that, in the last six months, they have fallen behind or missed payments for credit commitments or domestic bills for three or more months.

For those who are worried about some aspect of their personal finances, this is already having a negative impact on their wellbeing, with 37% who say money worries are negatively impacting their mental health and 23% who say it is negatively impacting their sleep.

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