Banks plan of shared branches: Hope at last for abandoned towns

Britain’s biggest banks are thrashing out a major deal to create hundreds of shared branches in towns and villages they have left behind, The Mail on Sunday can reveal. 

Banks are in advanced talks about setting up community banking hubs to protect swathes of the country from being cut off and unable to access cash or stay on top of their day-to-day finances. 

Sources said the banks are set to agree to a five-year deal to cover the costs of shared sites where customers of any large bank can pay in or withdraw cash and carry out transactions. 

The only significant sticking point is a row over how much each bank will pay, an insider has revealed. 

The Mail on Sunday has for decades called on banks to share sites as they have shut an increasing number of their least profitable branches across the country. Our Keep Our Cash campaign is calling for every town to have at least one bank. 

Last night one source close to the discussions warned that banks may seize on the initiative and trigger a huge new wave of individual branch closures. 

The source said it could give banks the perfect cover to reduce their overall networks closer to around 400 branches each. This is seen in the industry as the ideal size because it gives banks an outpost in all major population centres in Britain, the source said. 

It is thought that every branch closure can save a bank up to £1million over five years. Lloyds currently has 1,567 branches, Barclays has 755, NatWest has 833, HSBC has 540 and Santander has 452. 

If they slashed their networks to just 400 each, it would mean shutting as many as 2,147 branches between them. They could then tell customers to use a much smaller number of shared banking hubs. The MoS understands that the Financial Conduct Authority regulator is putting huge pressure on lenders to sign up to an agreement by Christmas – or potentially face tough legislation banning branch closures entirely. 

The Post Office is overseeing a trial of shared bank branches, which ends next month. 

Labour MP Siobhain McDonagh, who sits on the influential Treasury Select Committee of MPs, said: ‘When banks are in trouble, the taxpayers help them out, but when times are good they aren’t there for their customers. Banks have recently announced a huge improvement in profits and I think it’s time they stump up.’ 

Lloyds, HSBC, Barclays, Santander and NatWest have all been steadily chipping away at the size of their networks in recent years and Chancellor Rishi Sunak has promised to pass laws aimed at ensuring that everyone who relies on cash can access it. 

Officials are understood to believe that a new generation of shared banking hubs is vital to protect vulnerable people from being left without access to banking altogether. 

EY and Pinsent Masons have been advising banks in discussions. There are around 500 towns across the country that only have one bank branch left, according to research shared with the banks in discussions. The analysis found that between 150 and 200 locations would be severely cut off if the last branch in town was axed. 

As a result, these areas are most likely to be in line for a shared banking hub. 

The MoS understands that a community might qualify for a shared branch if it has a large population within about a mile and a quarter of the proposed site. There would also need to be a large number of people who rely on branches for banking. 

Research provided to the banks by consultancy firm Frontier Economics has estimated that each shared branch would cost £250,000 to set up and run over five years.

The customers’ banks might have to pay transaction fees estimated to be about £50,000 per year. 

This would create a total cost of £100million for 200 sites, which the Treasury is calling on the big banks to fund. 

But the banks are arguing about their share of the costs amid fears that these could spiral if more communities are later awarded a shared branch. Sparsely populated rural areas might fail to qualify for access to a banking hub as there may be too little demand to justify the running costs. 

People in those places may instead be encouraged to access banking services through the 11,500-strong Post Office branch network. 

A Treasury spokesman said it was consulting on new laws ‘to make sure people only need to travel a reasonable distance to pay in or take out cash’. The spokesman said ‘industry initiatives’ would ‘need to be compatible’ with the legislation.