Access to banking: Why do we need a community bank?
In the face of bank branch closures across Wales, how could a community bank help to ensure that communities and small businesses have access to banking services?
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With increasing rates of bank branch closures across Wales, the National Assembly for Wales’ Economy, Infrastructure and Skills Committee is running an inquiry into access to banking in Wales. Office for National Statistics figures show that nearly 6000 local branches across the UK have shut since 2010, with around 13 million adults in the UK now living in areas where at least half of the local banks and building societies have closed. Following bank branch closures, ATMs become a lifeline in many communities. Yet consumer group Which? found that nearly 1700 machines in the UK started to charge withdrawal fees between January and March 2019. The impact on communities and small businesses is stark.
Bank closures may disproportionately harm certain consumer groups such as older people or people in low-income communities, groups that are also at increased risk of financial exclusion. Studies have also found that the less affluent, those with basic qualifications and the unemployed are particularly likely to rely on branches to manage their money. As mainstream financial institutions pull out of economically distressed areas there is a risk that they are replaced by more predatory forms of financial institution.
Branch closures are also negatively affecting small businesses’ access to banking services. According to the FSB, small businesses continue to rely on branches for services with face-to-face interaction. For example, many small businesses value face to face services for advice in advance of major banking decisions. There is also a continuing reliance on cash and cheques that remain rooted in the operations of many small businesses and local economies across the UK. The impact of branch closures is often exacerbated by the closure of ATMs. Consumer group Which? suggest that following the closure of a local ATM, one in five consumers would be less likely to use local businesses.
In contrast, a community bank would redress regional inequalities and, significantly increase the proportion of bank lending going to the ‘real’ economy and SMEs. At present, Wales lacks money supply infrastructure owned and controlled within its borders. By creating money and recirculating wealth within the Welsh economy, a Community Bank has the potential to be a key agent in developing resilient and sustainable economies and communities.
A group of organisations and activists, that includes Cartrefi Cymru Co-operative and the Robert Owen Community Bank, have been campaigning over the last few years for a public bank in Wales. The group formed Cambria Cydfuddiannol Limited (Co-operative Society) which is the project delivery entity (a Co-operative Society) for Banc Cambria, a Community Bank for Wales. Much of the credit for continuing progress of the new bank goes to that group, for the fact that many of their ideas are now Welsh Government policy. In fact, First Minister Mark Drakeford made a commitment to establish a Community Bank of Wales in his leadership manifesto.
Banc Cambria will focus on providing straightforward banking services to individuals and small and medium-sized businesses across Wales. Services, based around a low charge current account, are likely to include micro loans and homeowner mortgages. Banc Cambria does not want to provide products that further exacerbate the economic inequalities evident across Wales. Banc Cambria is aiming to build economic resilience and financial inclusion; heralding a return to customer service, relationship banking and trust. It will seek to ensure those furthest from access to financial services are not left behind. We know that those at the margins of our financial system often pay more for services the rest of us receive for free.
The Wales Co-operative Centre has been supporting the development of Banc Cambria. You can read our joint response to the Committee’s inquiry here. The Cross Party Group on Co-operatives and Mutuals will also explore the issue in more detail at a meeting on 2nd July. To book please contact firstname.lastname@example.org