More uncertainty for bank workers

There were fears of further uncertainty for embattled bank workers after today's report suggested Lloyds Banking Group should shed more of its branch network to improve competition in the sector.









The Independent Commission on Banking (ICB) made clear in its interim report that the decision to wave through Lloyds's rescue takeover of HBOS was a mistake, but would now be too costly and complicated to undo.



Instead, the five-strong panel of grandees at the ICB wants Lloyds to offload even more of its branches and mortgage and savings business - saying the current plans to appease European concerns on state aid do not go far enough.



While the bank may be breathing a sigh of relief that the worst case scenario of a full-blown merger reversal appears off the cards, there are concerns that staff at the part-nationalised bank will once again pay the price.



Trade union Unite was scathing in its response to the ICB's report.



David Fleming, Unite national officer said: "The recommendation to sell off bank branches will not bring radical change, but simply brings more insecurity for working people in the finance sector and often harms communities where the bank branch closure means many will not have access to local financial services."



Around 27,000 job losses have already been announced by Lloyds since its ill-fated HBOS takeover, which left the combined group with mammoth bad debts and saw it turn to taxpayers for a bailout that has ended with it being 41% owned by the State.



But the deal succeeded in giving Lloyds unrivalled power in the retail banking sector, with 30% of personal current accounts and 21% of the savings market.



The ICB said competition had been "seriously weakened" since the financial crisis and that challengers to the big banks had mostly disappeared.



It believes measures agreed with Europe are insufficient to break Lloyds's stranglehold on the sector.



The bank has committed to offloading 600 branches and at least 4.6% of the UK personal current account (PCA) market and 19.2% of its retail mortgage assets.



The ICB said that even after the divestments, Lloyds would still account for 18% of savings business, 25% of current accounts, 19% of mortgage lending and 21% of unsecured personal loans - remaining a clear leader in the market.



It added that any new entrant buying the Lloyds business would struggle to make its mark, with only 4.6% of UK current accounts and around 5% of mortgages.



It would also have a weak balance sheet and immediate funding issues stemming from HBOS's high reliance on wholesale funding markets before its collapse.



"This picture suggests that the Lloyds Banking Group divestiture would be unlikely to give rise to a strong challenger, at least in its early years," said the Commission.



It added: "The Commission's current view is that the planned Lloyds divestiture is insufficient and that it will have a limited effect on competition unless it is substantially enhanced."



It is suggesting the Government works with Lloyds to increase the divestments.



"An enhanced divestiture could give an improved outcome for competition, both by reducing market concentration and by strengthening the divestiture's ability to act as a challenger. These competitive pressures should lead to improved prices, products and choice for customers, and to greater efficiency and innovation in the long run," said the ICB.



It does not rule out the possibility of a competition inquiry by UK authorities if an enhanced programme of divestments fails to transpire.



What is not certain is how much further Lloyds needs to go to pacify the ICB - or what further uncertainty is faced by staff.



Workers are already unclear over what will happen after the current planned branch sell-offs. While staff will transfer to any buyer, it is unknown how many will eventually be kept, given that this is dependent on whether or not the buyer has an existing back office function or if it already has a branch network.



The ICB's interim findings will now go out for further consultation, but attention will be focused on exactly what the ICB has planned to curb the power held by Lloyds in the UK.

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