European banks aim for a place in high street: British clearers are threatened by competition from the single market, writes Lisa Vaughan

BRITAIN'S clearing banks are beginning to feel the chill wind of European competition only a month into the single market.

Deutsche Bank, Germany's biggest, confirmed last week that it will soon apply for UK clearing bank status. At least two other European banks, Credit Lyonnais of France and Swiss Bank Corporation, are considering it.

If they became clearers, it would further shake the British banks' grip on their home market (Hongkong & Shanghai Bank's takeover of Midland loosened it last year). On the other hand, it represents a significant commitment to London by some of the world's biggest financial institutions.

The European banks want to join the club of UK clearers - the 14 banks that process over pounds 80bn in large sterling payments daily for themselves, 300 other banks and customers - as part of a long-term global strategy to become 'universal' banks.

In the short term, being able to process payments themselves would give them an edge in their wholesale banking business done in sterling, such as foreign exchange, money markets and cross-border corporate banking. But Credit Lyonnais admits its longer-term intention is to get into the UK retail market, and Deutsche Bank has not ruled this out.

Klaus Bertram, London managing director of Deutsche Bank, said Deutsche plans to apply for membership of the Clearing House Automated Payment System (Chaps) during the first quarter of 1993. The bank sees membership as a strategic move, allowing it to offer clients state-of-the-art European payments services. 'From a group point of view, it means we will concentrate all of our sterling money flows via London,' Mr Bertram said.

'It is not our intention to compete with the British high-street banks. We look at it from the point of view of clearing wholesale payments, not necessarily retail business.'

Olivier Mas, general manager of Credit Lyonnais in London, said that becoming a UK clearing bank would be a step towards entering UK retail banking. 'It is well known we have retail interest in Britain,' he said. His bank is considering joining Chaps because it would be a logical progression towards clearing in a single European currency, would offer the advantage of improving its service to existing customers and would enable it to offer fee-generating 'correspondent bank' services to other banks.

Britain's banks say officially that they do not feel threatened by their European rivals' interest and would welcome the competition. Foreign banks have long been key players in London's financial markets, and their huge volumes of sterling transactions bring more business to London.

But a banker at one of the big four clearing banks said: 'It would be foolish to close one's eyes and say it (Chaps application) is simply a straightforward move. It is a way for them to position themselves in the London market.'

The big high-street banks 'won't like it but they won't be able to stop it', another Chaps clearer said. If the Europeans eventually entered the UK retail market, TSB and Abbey National would be the most likely bid targets, he added.

Citibank, America's biggest bank, joined Chaps when the system was launched in 1985, but it failed in UK retail banking. Chaps has been open since then to all applicants, domestic or foreign, which meet the technical and volume criteria, according to the payments association run by the banks.

But European banks say certain conditions prevented them from joining and were only relaxed by the Office of Fair Trading and the single market banking directive in late 1992.

These conflicting appraisals may reflect the UK banks' respect for and fear of their European rivals' sophisticated strategies, market approaches and products. 'The potential for penetration into this market is great,' one banker admitted.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea