Bank bosses hit back at break-up proposals

Britain's two state-backed "zombie" banks yesterday rejected calls for a break-up of Britain's banking giants, telling the Treasury Select Committee that the sector was "enormously competitive".

Amid growing unrest at the "over-concentrated" nature of Britain's retail banking industry in the hands of the big four banking groups, both Lloyds' outgoing chief executive Eric Daniels and Stephen Hester, the chief executive of Royal Bank of Scotland, vehemently opposed suggestions that the big lenders should be broken up.

Mr Daniels, who described the banks as "enormously competitive", said: "I'm not sure dividing banks up further would bring any better outcome." He added: "The great majority of our customers are satisfied".

Mr Hester described the issue as "a red herring". "Big banks and small banks can be badly run and can be risky or not risky," he said. "I do believe that our scale, when properly configured and used, can be an advantage to our customers."

While the top four (also including Barclays and HSBC) in Britain control more than 70 per cent of the banking market, both men claimed the UK was "less concentrated" than other countries and argued that there was only limited crossover between products, with consumers frequently having their current accounts, mortgages and credit cards with different providers.

However, that is at odds with the message Lloyds has long given to the City of its success at cross-selling products to customers. It was only able to complete the controversial merger with Halifax/Bank of Scotland (HBOS) at the height of the financial crisis because competition rules were waived.

Lloyds ran into further problems at the hearing after Helen Weir, its head of retail banking, admitted she did not know how much she spent on bank charges. She claimed the real cost of "free" bank accounts amounted to the price of "a cup of coffee a week".

Tesco Bank, one of the newer and smaller players trying to take on the dominance of the big four, argued that the big four capture and share data on customers – needed to ensure lending is responsible – which is unavailable to potential competitors. It is run by a former HBOS executive Benny Higgins. In a written submission, Tesco said: "To ensure that we lend responsibly, banks must capture and validate detailed information on a customer's overall financial position.

"This favours the large, current account-holding banks [which] have access to this data and the network to meet the customer face-to-face. Furthermore, the established banks routinely share current account data which can be used to calculate income and expenditure, as well as wider product holdings, through a closed user group. This puts smaller players at a disadvantage."

The bosses of RBS and Lloyds also got into trouble over the vexed issue of bankers' pay. Mr Daniels admitted he was not the best-paid banker at Lloyds despite earning a £1.2m salary. He gave up his £2.3m bonus last year, in common with other banking executives. The fact that Lloyds, as a retail bank, pays more than £1.2m to "stars" below board level comes as something of a surprise and could heighten calls for more pay disclosures.

Mr Hester said he knew the amount earned by the highest-paid banker at RBS, whose investment arm has more than 100 people paid more than £1m, but would not disclose it.

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible