A tiny fraction (0.2%) of banking profits could end bank branch closure problems.

If banks were to contribute just 0.2% of their profits, over £40 million could be generated to support a new national network of 1,500 community banks, and solve the current "banklessness" crisis affecting large areas of rural, suburban and inner-city Britain, according to a pocket book published today.

The Case for Community Banking, published today (Monday 9th October) by the New Economics Foundation and written by Derek French, an expert in local banking, sets out the case for a new breed fo community banks, set up in pubs, churches, schools and village halls as well as defunct bank buildings. Siting banks in places such as churches could prove an effective solution to community decline, by underpinning other vulnerable areas of community life, the pocket book suggests.

The pocket books says community banks, which would be locally run but act as a shared agency through which all the clearing banks could service their clients, could be a powerful aid to local economic and social regeneration. American banks, which are required by law to operate in poorer neighbourhoods, have committed around $1 trillion dollars to them, and discovered that such lending can be profitable.

Citing the controversy that accompanied Barclays' decision in April to axe 171 rural branches, the pocketbook says bank directors are "between a rock and a hard place - between conflicting economic and social imperatives". When a bank closes a "loss-making" branch, the damage to its reputation is lasting and widespread. Yet not to do so could make it vulnerable to take-over. But the closure is "often the last nail in the coffin for economically marginal communities, producing a downward spiral of dependence, social exclusion and impoverishment - together with longer journeys, more pollution and congestion, more emissions of carbon dioxide, more global warming".

Examples of this impact include:

• Hartland in North Devon where, after Lloyds TSB's closure in March 1999, residents now have a 30 mile return trip to the bank.

• Liss in Hampshire, a village with a population of 6,500, where a study found that the loss of its three banks meant residents and businesses having to travel, collectively, an extra million miles a year - even though Liss is only six miles from the nearest bank.

• Houghton Regis, Bedfordshire (population 16,000) where, when NatWest closed the last of the three banks in the town, the pharmacist and the greengrocer lost, respectively, 20% and 30% of their turnover and other businesses shut up shop.

Without urgent action, Mr. French adds, hundreds more communities are set to lose their banks - adding to the 4,500 branches that have closed in the last decade.

Community banking provides an answer "flexible enough to meet the demands not only of customers and communities but of the banks themselves".
The pocketbook also strongly criticizes the Government's proposal to use post offices as agencies for banking, letting banks off the hook for responsibility to serve everyone. The pocketbook claims it would be a "recipe for poor service and crime" and cannot be more than a partial and subsidiary solution to financial exclusion and declining local economies. Potential customers are also worried - only six per cent of people questioned in areas currently without banks thought post offices were the most suitable answer.

The pocketbook proposes that the community banks would be overseen by a non-profit-making umbrella company, grant-aided by a new Social Banking Foundation, funded by a levy on commercial banks and backed with Government legislation in case the banks fail to act. It proposes 32 differing communities that could act as pilots for the new community banks. It welcomes the decision in July by the British Bankers' Association to re-examine the idea of shared branches, an idea which they had previously dismissed. The BBA is expected to report later this year.

For further information and comment contact

Derek French
Director
Campaign for Community Banking Services
Tel: 01582 764760

Or

Sarah McGeehan
New Economics Foundation
Tel: 020 7407 7447 x 228 (W) 07950 200869 (M)