Diolch, Lywydd. Banking in Wales since we lost the last of our locally owned banks at the beginning of the twentieth century has been the financial equivalent of the branch plant economy, characterised by local branches of large shareholder-owned companies headquartered in the City of London. Wales has been a victim, in that sense, of the most centralised and highly concentrated banking system probably anywhere in the industrialised world, with a market share of over 85 per cent, I think, for the big five.

We’re now entering a worrying new phase in that history of dominance, whereby even the branches of that branch plant economy are being closed, and large swathes of our country—rural communities, impoverished communities, not lucrative enough to achieve the kind of returns that modern banks are seeking—risk becoming a financial desert, without any form of comprehensive banking service. Wales is actually being hit more badly than most parts of the UK, and according to UBS, we probably stand to lose another 50 per cent of our remaining branch network over the next decade. Banks have presented this as part of a natural migration to online-only banking—the financial equivalent of processes that are under way in the economy elsewhere. And there’s an element of truth to this, but it’s also exaggerated by banks that are simply seeking to maximise profits by cutting costs associated with providing relationship banking, which does require universal coverage and face-to-face services. And the proof of that is that the rate of acceleration in branch closure is far greater than the decline in branch activity.

And of course, it flies in the face of what people say. Research for the Competition and Markets Authority in 2015 found that 63 per cent of current account customers felt that having a convenient local branch was either essential or very important, and that rose to 76 per cent for those who are among the digitally excluded. Far from merely responding to changes in the marketplace, banks are actually choosing to close banks in poorer areas while retaining them—actually, they’re even opening new branches—in more affluent areas, particularly in London. They’re doing this regardless of the impact that a branch closure will have for the unbanked, the digitally excluded, the elderly, the disabled, those on a low income and those living in rural communities. And the impact on business in unbanked communities is particularly acute. Research by Move Your Money, the campaigning group, using British Bankers Association lending data, shows that bank branch closures dampen SME lending growth by 63 per cent, on average, in postcode areas that lose a bank branch. That figure rises to 104 per cent for postcode areas that lose their last bank in town. On average, postcode areas that lose their last bank in town receive £1.6 million a year less in lending over the course of a year.

Sadly, banks don’t take into account the public interest or the effect a closure will have in making these decisions. These are predetermined closure announcements, there’s no consultation, and that’s why we find the access to banking protocol, referred to in one of the Conservative amendments, wholly inadequate. The existing model of banking in this country, which is based on supposed competition between these dominant big five, we contend is broken. The so-called challenger banks are targeting already affluent areas, or in the case digital-only banks, younger customers, not those areas that are underserved. The poorest are most likely to lack access to banking, and small business is neglected and lending, as we know, is disproportionately focused on London and the south-east of England.

Alternative institutions do exist—some of those who are part of the Responsible Finance network referred to in the Conservative amendment—but they struggle to compete in a system set up to privilege the big banks. What we need, we believe, is a more diverse banking system. Most other countries have a mixed economy in banking, which provides both greater stability and public accountability. We need access to finance for underserved groups to be recognised as a public good, and that’s why we’re asking the Welsh Government to take a more active role in the provision of this basic and essential service.

The Government already accepts the principle of direct intervention as a result of market failure in financial services. That, after all, was the rationale for the creation of Finance Wales back in 2002, and it remains the rationale for the creation of the new development bank. Of course, the development bank will carry the name ‘bank’, but it’s not currently intended to be a deposit-taking institution. It uses revolving or evergreen funds to provide debt capital or long-term equity, leveraging through partnering with other funders rather than using the tool of fractional reserve banking to create credit in the way that banks traditionally do. That’s why I think we do need to create a public bank for Wales, so that we can use that tool of leverage and actually provide that capital at a greater level throughout our communities more equitably.

There are three potential models that could be followed: one would involve the development bank working in partnership with existing financial institutions to provide access to services, possibly via a network of last-bank-in-town shared facilities. It’s the kind of arrangement or partnership that the often-quoted Bank of North Dakota, which is publicly owned, has with private sector banks in its own state. That said, many of the institutions that the Bank of North Dakota co-operate with are themselves community banks, which are a very important part of the US equivalent of the mixed economy in banking, and UK banks thus far have shown very little enthusiasm for this model of neutral shared branches that was long promoted by the Campaign for Community Banking Services.

A second option would be for the development bank to help capitalise a network of local savings banks in conjunction with local authorities, similar to the model we see in the sparkassen of Germany, for example, or the cantonal banks in Switzerland. Shared services in terms of the back office could be provided by the national development bank to this network of local savings banks. This is the model being promoted by the Community Savings Bank Association, which is already being trialled in Hampshire with the assistance of the international sparkassen foundation.

A third option is to partner with one of the few successful financial institutions that we have in Wales that is still locally owned, the Principality. It was very good to see them report excellent financial results today. The option there is to help them to develop even further into a mutually owned clearing bank.

We’re entirely open on the means, but the goal of ensuring a people’s bank of Wales is one that should unite us all in this Chamber. Now that the current banks are turning their backs in ever increasing numbers on our people, it’s time actually to create a bank for the people here in Wales. I’ll give way.