HISTORIC PRESS RELEASE : Community Banking: Increasing Access to Financial Services [December 1998]

The press release issued by HM Treasury on 3 November 1998.

Seminar at No 11 to Learn Lessons from the US

A call for banks to exploit the opportunities that exist to help the unbanked in our poorer communities was made today by the Economic Secretary, Patricia Hewitt.

The Minister was speaking at a seminar at No 11 Downing Street where the Government and UK banks and building societies were listening to representatives from the US who were spelling out their experiences of community development banking.

The Minister stressed there were lessons to be learned from the US experience. She said:

“Community banking can offer a win-win solution – it improves services for people in the poorest communities, and can prove profitable for the banks.

“This Government believes strongly that wider access to financial services – through positive action by the banking community – is vital. And we also believe that the driving force will be banks and building societies searching for new, profitable market opportunities.

“US banks have found profitable market opportunities in areas they might have ignored.

“I should emphasise that we are not planning to copy the US legislation. But we are interested in increasing the response of UK banks to the opportunities that exist for profitable banking in our poorer communities.”

Ms Hewitt praised the work of credit unions in providing ccess to financial services for those on lower incomes and said there would be Government proposals published on how to encourage the credit union movement. The Minister said:

“Credit unions have an important role in tackling financial exclusion. They provide savings facilities, a source of low cost personal credit and financial education and advice.

“Our approach to credit unions is to encourage the movement to grow, while retaining and strengthening its traditional focus on the poorer members of society.

“This will be partly through legislative change, lifting some of the restrictions on Credit Union operations. We have also been thinking about how the movement should be regulated in future; and the scope for setting up a share protection scheme.”

The Government’s proposals for credit unions will be published shortly.

The Minister also set out other initiatives in the area of financial exclusion which are being undertaken by the Treasury. They include:

a taskforce, to explore ways in which banks can work more closely with credit unions to increase their effectiveness, and it is studying existing good practice here and in other countries. The taskforce is chaired by Fred Goodwin from the Royal Bank of Scotland; and
two action teams, set up following the Social Exclusive Unit report, Bring Britain Together. One of the teams is looking into the prospects for increased access to personal financial services for people living in poor neighbourhoods, especially retail banking, but also credit unions and insurance. The other team will concentrate on encouraging enterprise in deprived neighbourhoods: looking at access to capital for small firms especially those starting up in poor neighbourhoods and better access to appropriate advice.