Money Insider: Will reforms really shake up the high street?
Saturday 17 September 2011
On Monday the Independent Commission on Banking (ICB), led by Sir John Vickers, published its 360-page report recommending some radical changes to the way our banks are structured.
Four years on from the run on Northern Rock, the far reaching proposals include separating the retail side of our banks from the more risky investment parts of the business and a recommendation that higher levels of cash are set aside to reduce the impact of any future banking crisis.
This is a mammoth and complex undertaking for the banks, due to be implemented by 2019 and at a cost estimated to be between £4bn and £7bn. As far as the customer is concerned, the main changes are around greater transparency, more competition in our banking industry and measures to improve the process of switching your bank account.
There is no doubt that we don't want a re-run of the banking crisis and further taxpayer bailouts, but there are rumblings within the industry that the Vickers proposals could lead to higher borrowing costs for personal and business customers.
The report also recommends that accounts are transferred between banks within seven working days and that a new redirection service be set up by 2013.
The redirection service is aimed at overcoming perceived customer concern that direct debit and standing order payments go astray during the transfer process, with the new system automatically redirecting payments to the new account.
The ICB says the new rules will make customers more likely to switch providers and, in doing so, generate more competition between our banks. However the reason people don't switch isn't primarily down to concerns regarding the switching process.
A survey of Moneynet readers earlier this year revealed that 37 per cent of customers are happy with their current bank while 34 per cent said they didn't see the point in switching as they felt all banks were much the same – and this is a situation that the Vickers report does not seem to grasp.
Only 29 per cent of people said they did not switch because they were worried that things would go wrong during the transfer process.
When the new redirection service is eventually in situ, we may see a little more activity in switching banks, but the task of choosing the right current account remains nigh on impossible for some consumers.
When it comes to authorised overdrafts, some banks charge interest on the amount you are overdrawn while others charge a daily fee, some capped at 10 days per month and others unlimited, while to muddy the waters even further, Lloyds TSB charges both interest and a monthly fee.
It depends on how much you go overdrawn and how often you're in the red each month as to which account is most suitable, but unless you have an hour or so to waste with a calculator to crunch the numbers, you won't know which is the right option for you.
If the industry really wants people to shop around for their banking then consumers need to have a clear understanding of credit interest or debit interest charges with the ability to simply compare one bank against another. At the moment there is too much focus on driving customers towards packaged accounts with a monthly fee or short-term promotional headline rates, rather than a decent long-term deal.
While the ICB proposals on ring fencing may prevent another bail out scenario, who is going to bear the cost of this exercise is yet to be seen. But with new legislation required to implement some of the recommendations, don't expect to see big changes on your high street anytime soon.
Inflation still a thorn in the side for savers
The latest inflation figures for August made more gloomy reading for savers. Just a week after National Savings and Investments withdrew its index-linked savings products from sale, the CPI measure of inflation increased again and now sits at 4.5 per cent. This means a basic rate taxpayer needs to earn a gross interest rate of 5.625 per cent to protect the value of their nest egg – something that is just not possible in the current market.
With the base rate stuck fast at 0.5 per cent for 30 consecutive months and the Government showing no signs of taking action to bring inflation anywhere near its almost laughable 2 per cent target, our savers continue to be ignored while those with variable rate mortgages rub their hands with glee.
It's time the Government recognised the plight of people who are reliant on their savings to maintain a basic standard of living. The inflation linked increase in the ISA allowance, due next April, will prove little comfort, and with stock market volatility currently scaring the pants off many investors perhaps it is time for a substantial increase in the annual tax free limit for cash savers.
- 1 Heavy metal producer's corpse to be mutilated by models as per his dying wish
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 3 Nineteen-year-old student left gifts for parents before taking her own life
- 4 Deliberately urinating before sex can increase risk of urinary tract infections
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
David Cameron says anyone criticising Eric Pickles' letter to Muslims 'really has a problem'
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village