The Financial Conduct Authority (FCA) and government should be prepared to intervene if banks do not do more to prevent the closures of local branches, MPs have suggested.

In its report on financial inclusion, which was published today, the Treasury Select Committee said the closure of local branches is likely to impact vulnerable and elderly customers more, urging banks to take action to keep them open.

The committee argued that face-to-face banking could be maintained and improved through the greater expansion of mobile bank branches by banks sharing facilities with each other, while also suggesting the pooling of staff of different banks. According to the MPs, competition law should not hinder the banks ability to share facilities. Although, if it did, the government should consider making changes to law.

The report stated: “The banking industry has justified the closure of branches by highlighting the large increases in the use of online or mobile banking. It may be the case that for certain categories of customer a visit to their local branch is now an unusual occurrence. However, there are still large sections of society who rely on bank branches to carry out their banking needs. A bank branch network, or at the least, a face-to-face banking solution, is still a vital component of the financial services sector, and must be preserved.”

It added that intervention by government or the FCA “may be necessary” to force banks to provide a physical network for consumers, if the financial services market is “unwilling to innovate” to halt the closure of bank branches.

The number of bank branches in the UK has fallen significantly, plummeting from 20,583 in 1988 to 9,690 in 2017. However, demand for a branch presence has fallen in the wake of financial innovation that allows consumers to control their finances online and on their mobile.

Despite this, the MPs said the number of IT failures experienced by banks, particularly TSB, resulted in consumers unable to access the online services and mobile applications to replace the branch service.

Due to a rise in the popularity of the Post Office being used as a branch replacement, the committee argued that it should receive funding from banks to carry out the basic services they are being asked to do on their behalf. MPs highlighted that the Post Office is making a loss on offering its basic banking services on behalf of commercial banks, adding that it should not be “subsidising the “big six banks” lack of a branch network.

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