Foreclosing on the human touch

The changing and increasingly anonymous face of banking - the bank manager has all but disappeared from the local branch - has led to a big increase in complaints from customers about the standard of service they receive.

On the day that NatWest announced it was cutting 10,000 jobs, around a third of the workforce, over four or five years, it was revealed that the Banking Ombudsman, the public's watchdog on the industry, this year received 22 per cent more telephone enquiries and complaints, and registered more than 7,000 complaints against banks, an increase of 8 per cent over last year.

NatWest is to close 300 branches, but Laurence Shurman, the Ombudsman, said closures were affecting both business and personal customers, especially those he described as "vulnerable", such as the elderly. "Some of the worst instances of maladministration appear to stem from attempts to achieve greater efficiency by closure of branches, computerisation and other moves towards rationalisation," the Ombudsman said.

The days when the bank manager was one of the best-known characters in the local community are fast disappearing. The chances are the manager's branch will have been closed or merged with another branch. Bifu, the banking union, calculates that nearly 3,000 high-street branches have been closed in the last six years, leaving just over 10,000 at the end of last year.

And almost all the major banks - NatWest, Midland, Lloyds TSB and Barclays - plan to close more branches in the years ahead. The Cooperative Bank is going one stage further, closing all its branches and replacing them with "Tardis" booths in which customers will communicate with managers via television screens.

The banks argue that they are closing branches because this is what customers want. Customers want bank via the telephone, not just for enquiries but to pay bills and alter direct debits. They want to bank outside office hours and importantly, they want the service to be cheap.

The industry is also becoming more competitive with retailers such as Sainsbury offering banking services and building societies planning to become banks too.

"They are under pressure to deliver cost efficient services," Mr Shurman said. He warned, though, that the closure of branches in small towns could cause a conflict of interest for the one bank, say, remaining on the high street. This is because the one bank could be handling all the accounts of the businesses in the town.

Not all of the rise in complaints in banks was due to efficiency drives. Mr Shurman said 32 per cent of the complaints received were about mortgages and lending compared with only 8.5 per cent in 1989, when he became Ombudsman. In contrast, complaints about cash machines were 6.5 per cent of the total compared with 36 per cent in 1992.

Mr Shurman is recommending that the "Code of Banking Practice" be changed to require banks to give customers a "reason why" letter to explain why they have been recommended to take out a particular mortgage. Of the complaints made, 736 were accepted for full investigation because of a greater willingness by banks to resolve complaints by agreement and because complainants have not always exhausted the bank's internal procedures when they approach the Ombudsman.

The smallest compensation award was pounds 15 while the highest was pounds 56,740. But because the Ombudsman had to turn some large complaints away during the year, Mr Shurman wants the maximum his office can award increased from pounds 100,000 to pounds 150,000.

10,000 jobs to go, page 20