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Virus speeds decline of bank branches as pensioners warm to video chat

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If you walk a mile in the northern French town of Saint-Lô you could pass a branch from every single bank in the country — BNP Paribas, Société Générale, Crédit du Nord, Crédit Agricole, Crédit Lyonnais, CIC, Banque Populaire et Caisse d’Epargne, La Banque Postale. 

The town in Normandy boasts one of the densest branch networks in France. It is home to 55 bank branches and local savings house branches, according to French statistical agency Insee. This is the equivalent of 28.8 per 10,000 people — vastly ahead of the 1.14 per 10,000 in the UK just across the English channel.

“I had no idea there were so many,” said Annie Larose, a 58-year-old woman who works next door to her Crédit Agricole branch and helps run her family farm. “I only go about five times a year, maybe 10, but I absolutely want my branch to stay open. It’s important.”

Despite closing close to 2,500 branches over the past decade, France overtook Spain last year as the major European market with the highest number of branches per capita, according to new analysis by consultant McKinsey for the Financial Times.

But as the coronavirus pandemic transforms customer habits and piles further pressure on the beleaguered European banking sector, even the most stubborn holdouts are facing pressure to change.

The fact that the most profitable clients tend to be older has, until now, been a factor in avoiding branch closures © Sameer al-DoumyAFP

“The relationship between customers and banks is changing, becoming more digital. Clearly we need to adjust the physical distribution network,” said Jose Garcia Cantera, chief financial officer of Santander, the eurozone’s largest retail bank.

“Will there be a role for branches in the future? Yes, but they are not going to be transactional like they were in the past . . . people now can do all the transactions they want from home.”

Santander said on Friday it plans to close almost a third of its 3,100 branches in Spain and cut 4,000 jobs, as the coronavirus crisis accelerates the bank’s shift online.

It followed Sweden’s Handelsbanken — one of the leading advocates in Europe for maintaining bank branches — which in September announced plans to halve its domestic network. The largest banks in each of Germany and Spain have already unveiled fresh cuts since the arrival of the pandemic, and HSBC — the UK’s largest lender by assets — intends to make “substantial” additional reductions to its network next year, according to one person involved in planning.

France is also tentatively moving in the same direction. SocGen, which has closed 390 of the 2,186 branches it had at the end of 2015, will later this month outline a merger with one of its subsidiary bank networks, Credit du Nord, which could involve more branch closures.

Executives in France face some unique local challenges, including a domestic market that is dominated by typically unlisted and well-capitalised mutual groups, giving them less incentive to cut costs.

A strong union movement which resists job losses, alongside state-backed banking offers such as La Banque Postale, and a large number of older customers who have resisted going online, has also prevented more rapid change.

“You’ve got this big generation problem” in France, Spain and Italy, said Ronit Ghose, an analyst at Citi. “Your most profitable clients are mid-50s to mid-70s in retail. I mean, you can’t run so far ahead of your client base.”

However, widespread lockdowns to halt the march of the coronavirus pandemic forced even the most reluctant customers to adopt digital banking.

Speaking before the pandemic, the chief financial officer of one major retail bank complained that “we might get 16 visits per customer per month to the app, but lots of it adds no value”. Customers embraced apps for transferring money or keeping track of spending but were still uncomfortable making major financial decisions remotely.

By the third quarter of 2020, in contrast, 80 per cent of Santander UK’s sales were completed digitally. NatWest went from doing 100 video banking calls a week in January to 9,000 per week in September.

“When we did customer insight work three years ago and said how many of you are excited about , it wasn’t that high,” said McKinsey senior partner Zubin Taraporevala. “Now everybody is doing this all day long. Grandma is doing it! That’s a game-changer for mortgages, for small business loans, even for advisory conversations for investments.” 

The pandemic has also exacerbated the pressure to cut costs. While the amount of money banks are setting aside for bad loans dropped in the third quarter, a prolonged period of record-low interest rates continues to squeeze retail lenders’ profit margins.

“The economics of retaining a very large branch network in areas without high footfall are hugely challenging, so I’d be very surprised if we don’t see more cuts,” said a senior executive at one lender which is currently closing branches.

Bank branches across Europe have fallen at an alarming rate

The difficult outlook has also renewed focus on bank mergers, where the chance to shut duplicate branches is a key attraction. CaixaBank and Bankia, which recently struck a €17bn deal to create Spain’s largest domestic bank, could close as many as 1,800 by 2023, according to Mediobanca. The deal has put pressure on local rivals like Sabadell to consider their own potential combinations, which would lead to further cuts.

“The big question is ‘can you make money with zero or negative rates?” Citi’s Mr Ghose said. “The answer [in some countries] is always ‘no we can’t’, but then look at Sweden, Denmark and Finland — they have the same interest rates or lower, and their banks make money, because they have much leaner cost structures.” 

Even the biggest proponents of cost-cutting don’t expect branch networks to disappear entirely. An October report by Forrester, a technology-focused research firm, predicted “regret will kick in later” for any established lenders that close their entire network.

“Customers don’t need to go just to do a transaction, but they still want to go for value-added services, particularly SMEs and big corporates,” said Santander’s Mr Cantera.

While residents in Saint-Lô balk at the prospect of losing even a single branch, recent experience across the English Channel provides a preview of the future facing more small towns as banks concentrate their efforts on city centres.

Wentworth and Dearne, a group of former mining communities in South Yorkshire, last year became the first parliamentary constituency in the UK without a single bank branch.

Its 100,000 residents still have a choice of branches in nearby Doncaster, Barnsley and Rotherham — but public transport links are poor, and the local MP fears for the knock-on impact on other local businesses.

“Many towns and villages like Wath [the largest town in the constituency] feel betrayed by the big banks,” said John Healey, the Labour MP.

“The coronavirus crisis could be an opportunity for banks to support our struggling high streets and regain people’s trust. I hope they take it, but it would mean a huge shift from my experience.”

Additional reporting by Stephen Morris in London and Daniel Dombey in Madrid



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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Britain’s wrong-headed approach to refugees

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UK immigration updates

Thanks to the bravery of volunteers who run towards storms at sea to rescue ships’ crews, few British institutions command as much respect as the Royal National Lifeboat Institution. The charity, however, has recently had to negotiate a different kind of storm, over its efforts to help refugees who get into difficulties crossing the Channel from France. Nigel Farage, the former Brexit party leader, accused it of running a taxi service for illegal trafficking gangs. Last week, the RNLI said it had received hundreds of thousands of pounds of extra donations in response.

The RNLI has become embroiled in a now familiar story when the summer months allow more small boats to make the Channel crossing. Compared with the flows to other countries such as Spain, Italy and Greece, only a handful of migrants attempt the journey. That makes the UK’s inability to control the border in an effective and humane way — and shabby treatment of those who do make it across — no less of a scandal.

Britain’s strategy for stemming the flow has relied mostly on paying the French authorities to limit the number of boats crossing and return any that leave to France, while deterring would-be migrants through the unwelcoming environment that awaits them. Just as EU countries are dependent on their neighbours for keeping entrants down — whether Morocco for Spain or Belarus for Lithuania — the UK needs French co-operation to control the mutual border. Diplomatic spats, whether over Brexit or extra Covid quarantine restrictions on arrivals from France, have made that harder.

The UK approach manages to be simultaneously ineffective and cruel. Yvette Cooper, chair of the home affairs select committee, wrote last week to home secretary Priti Patel to complain of unacceptable conditions in the holding facility for migrants who make it to the Kent coast. A recent unannounced visit by MPs found most of those remaining in the overcrowded facility sitting on a thin mattress on the floor, with women and children in the same room as adult men.

Earlier this year, the High Court ruled that “squalid” conditions in the Napier Barracks, a temporary centre set up last year to house asylum seekers during the pandemic, were so bad as to be unlawful. While arrivals have declined since the peak seven years ago, cutbacks have led to a backlog in processing claims, leaving more in a legal limbo.

Since the start of the pandemic Britain has shut down other paths into the country, ending a resettlement scheme. This has ceded the ground to people traffickers. The “push factors” of the risk of violence and torture at home and “pull factors” of higher living standards mean many are still willing to resort to risky and illegal methods to try to reach the UK. Creating a harsh environment for those who make it has done little to dispel the widespread belief among migrants that Britain is a better destination than other European countries, and stem the flow.

That will not stop the government trying. Barristers have warned that a clause in draft border legislation could potentially make it a crime to help asylum seekers arrive in the UK, with a maximum penalty of life imprisonment; at present it is illegal to do so to earn a profit. The Home Office says the clause is aimed at criminal traffickers. But along with a suggestion to set up offshore processing centres, the provision has rightly earned criticism from human rights groups. If the government is unwilling to create safe and legal routes, its only option is to prevent people from coming in the first place. That, ultimately, will mean relying on France.



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Olympic organisers investigate after Belarusian runner seeks refuge

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Tokyo Olympics updates

A Belarusian runner due to compete at the Tokyo Olympics was taken to the airport against her wishes after making complaints about her coaches, according to media reports on Sunday night.

The International Olympic Committee, the Games organisers, said it had asked for clarification from the Belarus team about the status and whereabouts of Krystina Tsimanouskaya, who is due to compete in the women’s 200m sprint on Monday.

Belarus’ dictatorial leader Alexander Lukashenko and his regime are widely seen as international pariahs after he fraudulently claimed victory in last year’s presidential election and then embarked on a brutal campaign to suppress protesters and supporters of his rival, which has seen thousands beaten and jailed. 

Images and video circulated on social media sites by Belarusian opposition activists appear to show Tsimanouskaya at Tokyo’s Haneda airport, where she refused to board a plane and instead sought refuge with Japanese police.

Krystsina Tsimanouskaya took part in the heats for the women’s 100 metres on Friday but narrowly missed qualifying for the semi-finals © Aleksandra Szmigiel/Reuters

The IOC said it “has seen the reports in the media, is looking into it and has asked the [Belarus] national Olympic committee for clarification”.

Japanese police did not immediately respond to requests for comment.

The Belarusian Olympic Committee did not immediately respond to requests for comment, but a statement attributed to the body suggests she had been removed from competition by coaches on the advice of doctors advice about her “emotional, psychological state”.

Late on Sunday, Tsimanouskaya shared a screenshot of that statement on Instagram with the message: “This is a lie.”

“I am asking the International Olympic Committee for help, they are putting pressure on me and they are trying to take me out of the country without my consent,” Tsimanouskaya said in a video message reportedly recorded on Sunday evening from the airport and posted on social media.

A person close to Olympic officials said there remained “confusion” around the incident, adding they had been told that Tsimanouskaya had boarded a coach to the airport and had gone through the departures area to board a plane to Istanbul, where she then sought Japanese police to ask for asylum.

Belarusian opposition leader Sviatlana Tsikhanouskaya tweeted that she was grateful to the IOC for its quick reaction. “She has a right to international protection and to continue participation in the Olympics. It is also crucial to investigate Belarus’ NOC violations of athletes’ rights,” she said.

Tsimanouskaya on Friday appeared to criticise her coaches and team management in an Instagram post that said she had been “ignored” and that “people in higher ranks should respect us as athletes”.

The 24-year-old had taken part in the heats for the women’s 100 metres on Friday but narrowly missed on qualifying for the semi finals of the event. She is listed on official Olympics sites as due to compete in the first round of the 200 metres at the Olympic stadium on Monday morning.





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