A war of words broke out yesterday between two of the UK's largest banks over the relative speed of their much-criticised cheque clearing systems.
Eric Daniels, the chief executive of Lloyds TSB, berated James Crosby, his counterpart at HBOS, for criticising the slowness of the UK payments system earlier in the week.
Mr Daniels said in a reference to Mr Crosby: "I was mystified how some individuals can talk about banks being slow [to clear payments] when those same individuals increased the float days to seven days last June [compared with the standard three days]. I find it anomalous."
He said that Lloyds now clears electronic payments instantly and makes no money out of the float (money held between a payment being made and cleared). "We are working with Apacs (Association for Payment Clearing Services) to improve the clearing cycle but we can only move as fast as the slowest bank," he said - another veiled criticism of HBOS.
On Wednesday, Mr Crosby, who wants to pitch HBOS as a competitor to the big four clearing banks, said he would welcome the much-opposed creation of a payments regulator to speed up cheque clearance times. He agreed with the former chairman of the London Stock Exchange, Don Cruickshank, that more needed to be done to make the banking sector more competitive, saying: "The Big Four are a big club," referring to HSBC, Royal Bank of Scotland, Barclays and Lloyds.
Despite protests from the Office of Fair Trading, HBOS extended the cheque clearing period on basic bank accounts by two days to six working days last June after being hit by high levels of fraud.
Shane O'Riordain, the main spokesman for HBOS, reacted to Mr Daniels' comments by saying: "People in glass houses shouldn't throw stones." HBOS says it provides two-thirds of basic bank accounts in the UK, aimed at people who previously had no bank accounts, and opens 25,000 a month. Mr O'Riordain said: "We're carrying a disproportionate share of social banking. If Lloyds wanted to get more involved in social banking, it would be a good thing for society.... Mr Daniels picked the wrong subject.
"We had to increase the clearing cycle to protect the bank and our customers from the incidence of fraud.... We remain of the view that cheque clearing times in this country need to be speeded up," he said, calling on the Big Four to drive change.
Lloyds' attack on HBOS came as the bank reported a 10 per cent rise in annual pre-tax profits from continuing operations to £3.36bn as all divisions improved their performances. Overall pretax profits fell 20 per cent to £3.49bn following the sale of non-core businesses which contributed about £1.2bn to profits in 2003. Mr Daniels said, "We had good momentum across our divisions and finished the year with a stronger second half, despite a slowing market." The results beat analysts' forecasts, and combined with a positive outlook and the news that the dividend would be maintained at 34.2p a share, drove 8.75p higher to close at 497p.Reuse content