UK Bank Branch Closures Affecting Lending for Small Companies
Banking institutions have been forced to close numerous branches across the country over the past three years which according to recent research has resulted in a significant reduction in the lending available to small businesses in these affected areas.
Britain's biggest banks in the Royal Bank of Scotland, HSBC, Barclays and Lloyds Banking Group have all been reducing their branches, pushing mobile and internet banking in lieu. A research study carried out by Move Your Money, a campaign group has indicated that many customers have been losing out on support as a result. The report has shown that lending in towns and villages where banks shut down branches had dropped by 63 percent.
The impact is said to larger when the last bank branch closes in a town or village. The study using data from the British Bankers' Association shows that there is a drop of 104 percent in lending growth for small businesses.
In a statement, Fionn Travers-Smith, campaign manager for Move Your Money, said
The UK's biggest banks are abandoning communities across the country, and today for the first time we can see the incredible damage that is happening.
It was only after the British Bankers' Association released data in 2013 as a measure to improve transparency about local lending patterns that there has been closer scrutiny of the impact over the closure of bank branches. The study by Move Your Money group is among the first to delve deeper into the data to understand how the closures have affected communities and lending patterns.
The matter is expected to be discussed in parliament this week, which might lead to demands for tighter rules for closing bank branches. A spokesman for the British Bankers' Association said that banks have protocols in place aimed at mitigating the impact of bank closures. These include partnering up with post offices to offer banking services and studying the impact of closures.
Earlier media reports have highlighted the fact the banks are closing branches in low income areas while expanding in wealthier areas. In fact, over 90 percent of closures are in areas which have income below 27,600 pounds which is the British average.
Industry experts say that Britain needs to implement legislation that mandatorily requires banks to maintain branches and lending in poor areas. In the United States, the U.S. Community Reinvestment Act aims to reduce discrimination in lending practices by requiring banks to lend in low income communities where the banks are chartered. The law also permits blocking of new branch applications if a bank fails to comply with its provisions.
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