William Kay: Abbey announces a facelift but it needs lots more than cosmetic surgery

It was a pity that Abbey, which must now be described as the former Abbey National, got so carried away with its otherwise welcome facelift that it had to call it "turning banking upside down". It isn't. It isn't even new, because HSBC's First Direct and Halifax's Intelligent Finance have for years adopted Abbey's new manifesto of simpler products explained in simpler language.

The spin is that the new approach will be "challenging the status quo and how banks behave to their customers". It's true that you can still find some pretty fusty branch managers, who think that customers are a nuisance who don't realise what a privilege it is to be allowed to leave their money with one of these institutions. But Barclays, HSBC, Halifax and Royal Bank of Scotland have all realised they had to brush away the cobwebs.

All bank managers must be conscious of the inroads being made by rival internet banks, as well as retailers such as Marks & Spencer, Sainsbury and Tesco. This has been helped by rule changes making it easier for customers to move from one bank to another, and, as in other corners of retailing, people are much more inclined to walk than the old, deferential customers.

But as Abbey itself acknowledges, the cobwebs and the accompanying complacency are not going to disappear overnight, and I suspect any managers resistant to change may be on their way out.

After a year as chief executive, Luqman Arnold clearly wanted to show he had not been idle, and wanted to make a bit of a splash into the bargain. But it will take more than a lick of paint and change of hearts and minds at the top. The whole culture needs a thorough purging before anyone can talk about turning banking upside down.

Producing better deals and not trying sneaky little tricks with interest rates would be a good start. For, while our front page plea for more education in personal finance acknowledges there is some way to go, more and more people are less impressed by style than substance. And that, in terms of better value, is what Mr Arnold has to start delivering.

* Apart from Abbey, this has been a critical week for Lloyds TSB, and in particular its Scottish Widows life insurance offshoot. The Financial Services Authority fined Lloyds £1.9m over mis-selling Scottish Widows' Extra Income Growth Plans through Lloyds branches, and the bank will also have to compensate customers at a total cost of £98m, making a nice, round £100m penalty. And Widows' chief executive, Mike Ross, was shown the door after 39 years.

The mis-selling danger was flagged up when Lloyds bought Widows four years ago for, as a wise soul remarked, tellers aren't sellers and Widows' policies are far more complex than most bank products. Such fears were brushed aside in the enthusiasm over the takeover, but have been proved justified, and are warning to banks as they feverishly line up panels of providers for them to sell through the branches after the FSA's depolarisation plans come into effect.

As for Mr Ross, all good careers come to an end, but I note he was short of what most companies regard as their retirement age so it must be assumed he was not keen to go along with every line of the mantra of Eric Daniels, Lloyds' still fairly new chief executive.

But I am more concerned at Mr Ross's successor, Archie Kane. He is, at present, responsible for information technology (IT) and operations, and headed the project to bring together the business of Lloyds and TSB. The IT aspects of that merger were one of the most disastrously executed operations in the recent history of banking, giving rise to a shoal of letters from our readers two years ago.

The commendable John Spence, then director of retail distribution at Lloyds TSB's , said at the time: "We are in the middle of a major change programme, and I understand customers' frustration. The integration of the Lloyds and TSB IT platforms has inevitably meant changing the service people have been receiving. But people like things to stay the way they are, and we will put some of that back the way it was."

If I were a Widows policyholder, which I was for 20 years, I would be shaking in my shoes.

w.kay@independent.co.uk

William Kay is Personal Finance Editor of 'The Independent'