Blimey, Banks Close Branches In Poor Places, Not Rich Ones


The Guardian seems to have a certain difficulty in understanding what a bank is, what a bank is for, here. It’s a mechanism by which the shareholders hope to enrich themselves. Sure, things can go wrong with that desire but that is the function of such an organisation. Once we’ve understood that then the rest here makes sense:

Banks are closing branches in deprived communities in England four times faster than in wealthy areas. High street banks have collectively closed 990 branches in the most deprived areas of the country since 2010, compared with 230 in the richest local authorities. The digital bank Pockit, which conducted the research, said a quarter of the poorest local authorities had lost more than 40% of their bank branches – totalling 705 closures – over an eight-year period. Between 2010 and 2018 about 5,035 bank and building society branches in England closed, a rate of almost two every day, it said. In Bradford, the 30th poorest local authority, the number of branches has dropped from 190 to 75, a 60% fall. At the same time Windsor and Maidenhead lost 17%.

Well, looking at local authorities, the population of Bradford seems to have been static over recent years. That of Windsor and Maidenhead growing. So that would be a part of the difference in branches. But let us leave that aside for a moment.

Clearly there’s technological change going on. We don’t need a branch now as much as we used to. So, the number is declining as a secular change in the economy. OK, that’s fine.

Now look at if from the point of view of the bank. The most profitable form of banking is when you get to borrow money and pay no interest then lend it out at interest. The function of a branch network is to gain that deposit base upon which you’re paying no interest – the float. Sure, there are costs involved in having branches so it’s not buckshee money. But that’s the aim. The branch network collects the cash which can then be lent out.

So, why would a bank preferentially close branches in poor areas? Because poor people have less money than rich people, obviously enough.

That is, there’s no mystery to this behaviour being reported. It’s obvious and simple. Poor people have less money than rich therefore banks chase rich people with branches, not poor people.

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