Senior bankers have hit back at Labour leader Ed Miliband’s plans to force the UK’s big five banks to sell off branches, warning that it could lead to thousands of the poorest consumers ending up without bank accounts.
Miliband is expected to call for greater competition in a speech on Friday. Most recent figures from the Office of Fair Trading in 2012 showed that Barclays, Royal Bank of Scotland, HSBC, Lloyds (including TSB), Santander and Nationwide building society run more than 90 per cent of the country’s current accounts.
Labour sources denied reports that Miliband will propose a 25% cap on market share, but refused to say what limit he might suggest.
John Cridland, CBI Director-General, said:“An arbitrary cap on structure is the wrong way to boost choice in banking. The focus should be on ensuring that businesses and consumers can access the finance they need, not a debate on structures, which is the responsibility of the competition authority not politicians.”
One senior banker said: “Current accounts are far from the banks’ most profitable areas of business. If banks are forced to limit the number of such accounts they run they will obviously shed the least profitable or the most loss-making customers. Those tend to be the least well-off people”.
Gary Greenwood at Shore Capital said: “Splitting banks further runs the risk of creating more uncertainty for customers. It is a logistical nightmare. Creating new systems that work is a key issue. Also branch banking is becoming increasingly redundant as a distribution tool, given the growth in online and mobile technology.”
Tony Anderson at legal firm Pinsent Mason pointed out that banks are already dealing with implementing the Banking Reform Act. “Why raise this as a proposal now?” he said. “UK banks need time to digest the new legislation and implement it... With greater focus on technology, mobile banking and the increasing use of apps, it is debatable whether a branch sell off is where bank strategy on market share should be focused.”
Miliband’s call for the Government to prevent taxpayer controlled Royal Bank of Scotland from paying bonuses of up to 200% of salaries also faced criticism.
Anthony Browne, head of the British Bankers’ Association, said: “One of the problems of the bonus cap overall is that it doesn’t recognise that London is a global centre of excellence. Investment bankers now earn less in London than they do in New York, Singapore or Hong Kong.”