The decision follows changes in the way banks must carry out anti-fraud and money laundering measures and customer due diligence over the last decade.
The high costs of changing these procedures for a small bank, estimated to be a substantial six-figure sum, would be prohibitive, according to the board.
Originally founded in 1924 and established North Lanarkshire-wide in 1996, NLMB is one of only two municipal banks remaining in Scotland, with its primary function being a savings bank, with 4,756 accounts currently existing. Money is deposited and withdrawn using a passbook in branches.
NLMB relies on its corporate bankers which in this case is RBS, a much larger bank, to provide a banking system that allows the municipal bank to deliver banking services. Earlier this year, the corporate bank carried out a review of NLMB’s procedures which recognised that very substantial investment would be required which would have a significant impact on NLMB’s cost model and sustainability.
Councillor Robert Burrows, chair of NLMB, said: “We know the municipal bank is popular with some people in North Lanarkshire. However, we really have no choice but to comply with modern money-laundering, anti-fraud and customer check measures.
“The bank was established long before any of these measures were necessary and, unfortunately, no big bank will provide NLMB with a banking platform without these measures being in place.
"The costs associated with doing so are prohibitive and the board has decided, with some regret, that there is no alternative to closing the bank.”
NLMB will directly contact existing customers and work with them to ensure that they know their options and can access other banking arrangements well in advance of the municipal bank closing, which is expected to be Autumn 2022. No new accounts will be opened.
A dedicated helpline will be established to provide individual and tailored support, with particular arrangements for vulnerable customers put in place.