Numbers don't add up for banks

By Tony Gee

MANGONUI - Simple economics is largely to blame for the rash of bank branch closures in small towns and suburbs throughout the country.

In recent weeks, both WestpacTrust and ANZ have closed or announced the pending closure of more than 20 of their branches in rural communities, small towns and suburbs.

And in an 18-month period from June 1997 to December last year, banks closed a total of 109 of their branches throughout New Zealand.

In the Far North, Kawakawa will join Mangonui, Kaeo and Rawene as towns without a bank when the WestpacTrust closes its Kawakawa branch on April 12.

David Tripe, director of Massey University's Centre for Banking Studies, said the issue was one of relating the cost of operating a branch to the business that went through it.

Even a three-person branch costs a bank around $300,000 each year to run.

If a bank was operating on a 1 per cent profit margin, it would need $30 million a year in business through that branch.

In population terms, banks were "pushing it" to maintain branches in rural and small communities like Doubtless Bay with 4000-odd people, Mr Tripe said.

He expected there would be yet more small branch closures although in the Far North's case, there was probably enough business in and around Kaitaia for all present bank branches to continue to serve the district.

There were a number of things a bank should do when it announced a branch closure.

These included ensuring, by mail, that deposit and direct credit system arrangements were sorted out with its customers.

Mr Tripe believes some branch closures had been handled badly. "Things shouldn't be made too hard for customers," he said.

The finance sector union, which is calling for a parliamentary inquiry into the current wave of branch closures, maintains banks have some social responsibility when they pull out of a community after using its money for many years.

"We believe banks have a responsibility to ensure some basic services are left behind or are in place after a branch closure," union general secretary Paul Goulter said this week.

"No matter how they squirm, banks do have some basic social obligations."
Branch closures, especially in rural communities, were particularly hard on staff who worked there, he said.

"They generally become unemployed and disappear into the community or maybe pick up part time work.

"The knock on effect within the community can be quite dramatic but the banks don't care."

Mr Goulter said the response of one bank to a closure was that older people should be trained to use the Eftpos system.

An inquiry was now needed to look at the impact of branch closures on communities, especially in rural areas.

The union says any inquiry should consider issues like notice of closure to customers, waiving fees and penalties for early loan repayments or closing accounts, and continuing some form of customer service after a branch closure.