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There is the how of bank branch closures and then there is the why; let me, very briefly, say something about the how. As every Member has pointed out—I can attest to this in my own constituency—there is a gross lack of proper consultation, to the point of arrogance on the part of the banks. My own example from East Lothian is the town of Prestonpans. My population base in East Lothian is expanding, and Prestonpans is a growing town that will soon contain 10,000 people. However, RBS is about to close the last branch of the last bank in the town. RBS has form. In 2010, it promised that if a branch was the last bank in town, it would not close that branch. In the past two years, 165 “last in town” branches run by RBS in Scotland and the north of England have closed, so that promise has gone by the board.
The lack of consultation is terrible. I found out about the Prestonpans closure by reading about it in the newspaper. Under the bank protocol, all stakeholders are supposed to be approached, but they are not. That contrasts dramatically with the example of Openreach. Yesterday a number of Members, some of whom are in the Chamber today, had a meeting with its chief executive, Clive Selley. We can make numerous complaints about Openreach and access to broadband, but at least the chief executive of Openreach will sit down with MPs and talk about the situation in individual villages containing only 50 people. Is it possible to get the chief executives of banks to talk to us directly? No, and that is particularly true of RBS. I commend the campaign to reverse the position that has been conducted by the whole community of Prestonpans, by me, by the local Member of the Scottish Parliament and by local councillors. We are still waiting to have a discussion with Mr Ross McEwan. We are not going to give up until he sits down and talks to us.
There is a solution, which I commend to the Minister. The Financial Conduct Authority has a responsibility because it oversees bank conduct on behalf of the consumer. The banks are reassessing the BBA protocol on bank closure, which has been discussed several times in Members’ contributions. The protocol is as weak as dishwater, but even that is not being adhered to. It is time for the FCA to step in and hold discussions with the BBA in the course of a re-evaluation of the protocol, and whatever comes out of that, the authority should be prepared to step in and enforce the protocol, rather than having it as something that is simply non-statutory and ignored by the banks.
Why the closures? Of course technology and market demands are changing, but we must not let the banks off over this. We have the most centralised, monopolised retail banking system in the western world. It has made a fortune over the past 20 or 30 years. That banking system grew by mergers, and as the banks grew and merged, they did not modernise and integrate their IT services, which is why every major bank has a whole legacy of computing systems that are all incompatible and falling apart, meaning that their cost base is huge. What are they doing about it? They are closing branches, firing staff and squeezing customer services in order to get the money to resolve something they should have invested in over the past 20 or 30 years. Do not tell me that this is a wonderful move by the banks and that they are closing branches because we are all moving to use the internet. This is the banks trying to find money to address a problem they should have dealt with earlier.
I will give one specific example involving RBS. It has been told to sell off 300 branches of Williams & Glyn, but it has suddenly discovered that the Williams & Glyn computer system is so dreadful that it will not be able to make the sale. RBS has now spent at least £1.2 billion—I suspect the true figure is about £1.5 billion and rising—to put a new IT system into Williams & Glyn so that it can be sold. As RBS is so strapped for cash, it has to make new savings this year of £800 million to help to fund the new IT system for Williams & Glyn. The bank in Prestonpans and all the other RBS branches that are affected are being closed not because of the wonderful new nirvana of us all moving to internet banking, but because, yet again, bad management has led to a need to squeeze costs to deal with a problem that should have been solved before. We should not let the bank off the hook.
We need some solutions. Why not have a universal banking obligation? After all, the Government have agreed to a universal broadband obligation, which helps rural areas in particular—such places are also where the bank branches are closing—so why not have a universal banking obligation? It could be linked to particular licences for the big retail banks, particularly for more complex products. It could also be linked to particular rural areas. We need a degree of regulation because otherwise the banks will just laugh at us.
We need to expand the market for local banking services, especially for SMEs. The new bank capital regulations mean that banks have to keep quality assets that they can realise if they ever have to resolve a liquidity problem, but the Bank of England and the Prudential Regulation Authority have rather left it up to the big banks to model their own capital asset requirements and the quality of their assets. The big banks do that by deeming small business loans as some of their most risky assets. Therefore, they have to lay aside a lot of capital if they want to expand SME loans, but they do not want to do that, so SME loans are not expanding.
The Bank of England and the PRA should step in because all the evidence shows that small business loans are, in the main, very safe. At the tail end, there is perhaps a high risk, but most of those loans are secure. The banks are again using their interpretation of regulations to undermine what we all want, which is more lending to SMEs. If the Bank of England and the PRA intervene and force the big banks to change their assessment of their risk-weighted assets, we would get more SME lending. We would also get smaller challenger banks coming into the market and setting up in our smaller towns precisely to get that SME business. We should not let the banks get away with the notion that this is all inevitable.
Finally, I want to give this message to Mr Ross McEwan: myself and the people of Prestonpans are ready to meet you at any time.