should follow America's
example and consider forcing banks to disclose more information about their
lending and investment in deprived areas as part of the fight against financial
exclusion, according to a new report.
The New Economics Foundation, a left-leaning thinktank,
said mandatory disclosure of such information would make it easier to identify
who the banks were reaching and who remained outside of the banking system. It
would like to see banks having to reveal more about, for example, their small
business lending, branch availability and the numbers of basic bank accounts
The report, which was co-authored with the US-based
Woodstock Institute, said the recent collapse of the Farepak Christmas savings
scheme had again revealed the vulnerability of those on very low incomes. And
with an estimated 2,500 post offices set to close over the next two years,
accurate information on the availability of banking services in vulnerable
communities would be critical in the fight against financial exclusion.
In the US,
the Community Reinvestment Act requires banks to disclose their lending and
investment in poorer areas, and it has played a key role in ensuring that
billions of dollars of loans and credit have reached people living in these
communities. There, publicly available information has been used to keep bank
branches open in low-income communities, and with some UK banks continuing to
shut branches, the NEF believes this could also happen in this country.
It said the government "should now consider
mandatory bank disclosure along the lines of the Community Reinvestment
Act". The report, Full disclosure: why bank transparency matters, provides
the first detailed comparison with the US,
where banks have disclosed information since the late 1970s.
It focuses on two arms of the Royal Bank of Scotland
empire: Charter One Bank in Chicago,
which was recently acquired by Citizens Bank, part of the Edinburgh-based
group, and RBS's branch network in Manchester.
The researchers looked at the level of information available and the impact
this has had.
They found that data on small business lending, bank
branch availability and basic bank account opening in deprived areas of
Manchester was generally difficult to obtain, had to be gleaned from a
multitude of sources, and was "inconsistent and in many cases incomplete
… By contrast, detailed and meaningful analysis can be carried out with the
information that US banks disclose by area, which in turn can be used to combat
In 2003, HSBC announced the closure of two of the very
few remaining branches in lower income communities in Buffalo,
New York State, and community organisations
were able to analyse HSBC's performance from publicly available data and use
this to persuade the bank to keep one branch open and operate a combined
community centre and bank in the other.
Coincidentally, HSBC is currently at the centre of a row
over its latest UK
branch closure programme, with five branches having shut for good during the
last few weeks and five more due to close in January. Those closing next month
include the branch in Shepshed, Leicestershire, which is the last remaining
bank in the town.
Some campaigners are trying to persuade HSBC to turn the
Shepshed outlet into a pioneering shared branch providing a common counter
service to customers of all banks, but the group is resisting such calls.
However, HSBC has agreed to leave a cash machine behind in Shepshed.
Derek French, who runs the Campaign for Community Banking
Services, said he was not sure whether Britain needed something like the US
act, but he added: "We certainly need the government to have some teeth in
its dealings with the banking sector on issues which one could loosely collect
together under the description 'social banking needs'. At present, the banks
run rings round the government, knowing there is no appropriate legislation in
place, and that the legislative timetable makes the threat of any pretty
Read the full report here: