December 13, 2017
We own this bank
Since its collapse, Royal Bank of Scotland has accepted billions of taxpayers’ largesse – to the extent that we currently own 73% of it. All of which puts last week’s announcement to close a quarter of all its branches and sell off the buildings, in a rather different light. If RBS has any interest in public redemption, it might like to think again about who actually owns these buildings and the vital role that branches play, particularly in rural communities. If not maintaining them as branches, the very least RBS should do is offer them up as community assets.
Royal Bank of Scotland is closing 259 branches, a quarter of its network, in a move that puts nearly 700 jobs at risk and sparked political outcry and warnings about the end of high street banking.
The bailed-out lender said 62 Royal Bank of Scotland and 197 NatWest branches would shut as customers increasingly turned to online banking.
The Unite union said 1,000 roles faced the axe, although the bank – which is 71% owned by the taxpayer – said the move would result in 680 redundancies after redeployment.
Rob MacGregor, Unite’s national officer, described the cuts as “savage”.
“Serious questions need to be asked about whether these closures mark the end of branch network banking … This announcement will forever change the face of banking in this country resulting in over a thousand staff losing their jobs and hundreds of high streets without any banking facilities,” he said.
He asked why the government – which last week signalled it was preparing to sell off its remaining stake in the bank at a loss – was signing off a branch closure programme on this scale.
Jonathan Reynolds, the shadow City minister, said he was astounded the government had agreed to the plan and said Labour would change regulations to stop branch closures where there is a clear impact on local communities.
“As the taxpayer continues to own 71% of the bank, its priority should be serving the best interests of UK customers,” said Reynolds.
The Treasury said it did not intervene in commercial decisions.
The Scottish secretary, David Mundell, sought an urgent meeting with RBS to discuss the impact of the bank closures across Scotland, describing rural branches as “a lifeline for many people”.
Ross McEwan, the RBS chief executive, has repeatedly talked about the increasing use of online and mobile banking. Figures provided by the bank on Friday showed that since 2014 the number of customers using branches has fallen 40% while mobile transactions increased by 73%. One in five RBS customers only use its services digitally.
McEwan is also under pressure to cut costs to bolster the bank’s profitability. When it reports its results in February, the bank is expected to admit it will have incurred 10 years of full-year losses since its taxpayer bailout in 2008. It has already reported £58bn of losses.
It is the second branch closure programme announced by RBS this year, after 158 closures were announced in March. The consumer body Which? calculated that across the industry 1,747 branches have been shut in three years. Those figures do not include the 49 closures announced by Lloyds this week.
The closures will take place in May and June and RBS said it would keep compulsory redundancies to a minimum. “We realise this is difficult news for our colleagues and we are doing everything we can to support those affected,” RBS said.
Consumer body Which? warned about the impact of the closures at a time when there are fears that thousands of cash machines could be removed or start charging – because of proposed changes to the way the system operates.
“At a time when the payment industry is putting forward proposals that could significantly reduce the number of free-to-use ATMs, this news will be even more concerning for consumers who must not be left struggling to access the cash they need,” said Gareth Shaw, a money expert at Which?.
The high street banks argue they have to compete with digital-only rivals such Atom and Monzo, which operate without a branch network.
These digital banks are aiming to capitalise not only on customers’ use of the internet but also to benefit from forthcoming regulatory changes that will make it easier for customers to shop around for financial products.
As it published the outcome of its latest stess tests on the banking sector this week, the Bank of England said that “fintech” – financial technology – “may have profound consequences for incumbent banks’ business models”.
Alongside its usual health check on the biggest lenders, Threadneedle Street looked at how banks would cope in the long-term with technological advances at a time when profits were already under pressure from low interest rates.
Across the sector, the Bank calculated that profits could take a hit of £1.1bn by the end of 2023 and customers should be able to use fintech to manage their money more effectively so be less likely to use an overdraft, through which banks generate £2.6bn of profits a year.