World Economy

Top UK Banks Migrating to Wealthier Districts

Top UK Banks Migrating  to Wealthier Districts Top UK Banks Migrating  to Wealthier Districts

Britain's largest banks are disproportionately closing branches in the lowest-income areas while expanding in wealthier ones, taking bricks-and-mortar services away from communities where they are arguably needed most, an analysis by Reuters shows.

HSBC, Royal Bank of Scotland, Barclays and Lloyds Banking Group are among banks that have cut 600 branches from April 2015 to April 2016.

More than 90% of the closures were in areas where the median household income is below the British average of £27,600 ($39,042), according to an analysis of Office for National Statistics data on average incomes in the locations where branches were closed.

By comparison, five out of the eight branches opened by these banks over the same period were in some of the wealthiest neighborhoods in Britain—Chelsea, Canary Wharf, St Paul's, Marylebone and Clapham, all in the capital, London.

The banks say in an era of falling revenues, they must look for ways to cut costs, which includes reducing staff as well as closing branches, an obvious measure as more and more people do their banking online.

They say they choose which branches to close on the basis of where they have the fewest customers and deny they specifically target poorer areas.

But campaigners say banks are cutting too fast in places where people are less able to fall back on digital banking services because of a lack of access, finances or ability to use the internet.

"We are witnessing the creation of a dual financial system: one for the middle class and wealthy and another for the poor," said Fionn Travers Smith of Move Your Money, which campaigns for ethical banking.

Big Financial Impact

The situation is similar in the United States, where 1,600 branches closed in 2015, according to SNL financial. The result, according to a 2014 study by MIT economist Hoai-Luu Nguyen, is a decline in lending, especially in low-income areas.

High Street bank branches are important to communities who use them for basic functions such as withdrawing money and cashing checks, politicians and business people told Reuters.

The village of Cross Hands with a population of 4,500 in southwest Wales is a classic example. It is set to lose its last branch when the local Lloyds closes at the end of July.

Local businesspeople say the closure will mean they are forced to travel to nearby Tumble, a 90-minute round trip by infrequent buses for many residents without cars.

A local shop owner said the loss of ATMs in the village from branch closures has also hurt business, as few shops take credit cards.

About a third of cash machines now charge customers to withdraw money, and studies such as one by Nottingham University say when branches close, less-regulated financial institutions, including payday loan providers and cash-checking centers, fill the void at a higher cost to customers.

A Perfect Storm

With a population of 3 million, Wales has been plagued by high unemployment and poverty since the closure of coal mines in the 1980s. Western Wales and the Valleys has the highest level of poverty in northern Europe, with the average income at 67 percent of the European Union average, according to 2013 EU statistics.

"The fact that poorer areas are being hit the worst by branch closures, means you're going to see a perfect storm making it harder for them to regenerate," said Jonathan Edwards, an MP for Carmarthen East and Dinefwr in south west Wales.

HSBC, Barclays, RBS and Lloyds say they have signed up to protocols aimed at minimizing the impact of branch closures, including partnering with the post office to offer services and carrying out impact studies before closures.