Alone among UK retail banks, Metro Bank is actively marketing its safety deposit boxes. By contrast, established players such as Lloyds, Barclays, RBS NatWest and HSBC have all axed the service. John Schaffer investigates
The options for depositing valuable items such as jewellery and family heirlooms in safety deposit boxes have largely been eradicated at the major UK banks.
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Barclays ended its safety deposit service in September 2013, giving only six months warning for customers to remove their possessions, having restricted the offer to existing customers from 2010.
Jenny Michalczuk, vice president of media relations at Barclays, told RBI: "Various complexities across our systems and storage facilities meant that it was increasingly complex and costly for us to continue to provide the service. Therefore after a full review of the Barclaysafe Premium Service, and after careful consideration we decided to withdraw the service."
HSBC previously offered the service in only six of its branches until ending the offer totally.
Similarly, Lloyds offers a service for existing security locker clients, but not for new to bank customers since 2011.
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By GlobalDataPrivate banks such as RBS’ subsidiary Coutts still offer safety deposit boxes, in line with the demands of its wealthier client base that are more likely to own high value items for secure deposit. For RBS Group retail clients, six RBS and one NatWest branded branches offer the facility but for existing safety deposit customers only.
Metro Bank is unique in offering a safety deposit box service at all of its stores. As the major banks are ending the facility, Metro Bank is targeting a gap in the market. The Metro Bank service offers access to its boxes at each if its 32 stores, seven days a week, 362 days a year.
A Metro Bank spokesperson recently disclosed that as soon as a new store is opened, it sells out of available safety deposit boxes, suggesting there is a significant unmet demand for the service.
As the large retail banks are progressively closing their branches and shifting their focus to digital banking, branch services such as safety deposit box provision becomes a less attractive investment for banks.
The availability of security lockers in branch clearly requires physical space, a scarce commodity at a time of austerity. Extra security measures have to be in place which also contributes to the cost of the service.
Metro Bank: actively marketing boxes
Metro Bank provides the safety deposit box service to customers who are account holders and over the age of 18. Customers are required to pay their service fees via their Metro Bank account. However, customers are still required to insure items if they use a safety deposit box. This would normally be added on to a home insurance policy. The bank provides a range of box sizes with prices from £180 to £600 per year.
A Metro Bank spokesperson told RBI: "We’ve seen great demand for our safe deposit boxes from both personal and business customers, who are able to reserve boxes both in store and online."
Competitors in the safety deposit box market are now few and far between. Amongst retail banks, State Bank of India (SBI) provide a service. The bank has a small but growing presence in the UK, with 10 branches, set to grow to 12 this year; boxes are currently on offer at five of the outlets..
Lax Seshan, head of retail products at SBI UK, told RBI: "Some SBI customers have held deposit boxes with the bank for more than 20 years. Our customers are looking for a place they can trust their valuables with, whether that’s legal documents or objects of importance to them. It’s a service valued by our customers and we are seeing an increasing number of enquiries for our safety deposit boxes."
Seshan added: "Whenever a customer takes out a safety deposit box they have to sign a terms and conditions document declaring that they are not storing illegal items but otherwise the contents remain confidential."
Competition for the service now comes largely from private companies. Metropolitan Safe Deposits offer security boxes in two London locations. Unlike Metro Bank and SBI, Metropolitan Safe Deposits include £10,000 of contents insurance cover.
Christopher Barrow, group chief executive at Metropolitan Safe Deposits, told RBI: "Initially, the banks stopped providing the service to new customers. In recent years, they have been increasingly closing down the physical vaults (some open vaults with bank boxes and others with safe deposit boxes), hence the rising number of existing customers being instructed to exit.
"One problem is that there are only a handful of independent safe deposit businesses, and very few of them have been long established. There have been many start-ups in the past 12 months, but there have been very few successful new entrants since the 1980s. The reason is that vaults require significant capital and do not normally reach cash flow breakeven for a number of years.
"It is a slow-build business."
The shady side of safety deposit boxes
Although the vast majority of customers use the services of safety deposit boxes for legitimate purposes, deposit boxes have been connected with illegal activity.
It is understandable that banks may have wanted to distance themselves from the secretive nature of safety deposit boxes following Operation Rize in 2008. The Metropolitan Police investigation involved raids on boxes at three London locations. Around 3,500 boxes were investigated and as well as the expected contents of cash and jewellery, illicit items were found such as stashes of child pornography, false passports and guns that were subsequently linked to murders.
The investigation resulted in a haul of £53m ($34.35m) in banknotes, with the arrest of three directors of a safe deposit company on suspicion of money laundering. Although the services at banks were not under investigation, the incident surely tarnished the perception of the activity.
Only a small proportion of box owners investigated during Operation Rize were found to have committed a criminal act. However, a large number of innocent box owners had their money or possessions confiscated by the police. The goods were held under the Proceeds of Crime Act (2002), where valuables and cash above £1000 are presumed by the police to be linked with criminal activity. The onus was then upon the accused to prove otherwise.
It appears that there will always be some form of demand for safety deposit boxes. Offering the service gives Metro Bank a USP where competition is diminutive amongst other UK banks.
