High street banks make £10bn profit

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The Independent Online
LABOUR has drawn up plans to subject the high street banks to a tough regulatory regime modelled on the controls over privatised utilities.

The strategy has come to light as banks are set to post record profits in excess of £10bn - as much as 300 per cent higher than last year - while increasing charges to private and business customers.

Banking insiders calculate that Barclays Bank will unveil profits up from £664m in 1993 to £2bn last year. Lloyds goes up from £1.031bn to £1.274bn. NatWest profits have jumped from £989m to £1.566bn, and HSBC (the Midland) from £2.584bn to £3bn.

The TSB will report a profits hike from £301m to around £500m, the Abbey National is up from £704m to £879m, the Royal Bank of Scotland will show a rise from £265m to £493m and the Bank of Scotland is up from £269m to £443m.

Overall, the top ten banks will post profits of £10.634bn - up by an average 48 per cent, prompting the Labour Party to bring forward its proposals for tougher government action to get the consumer a better deal from their banks.

While profits have soared, so has public dissatisfaction with the high street banks.

New figures show a surge in complaints to the banks' own Ombudsman. In the year to September 1994, 8,691 people complained in writing, and many more by telephone.

Shadow Chancellor Gordon Brown will tomorrow announce the Opposition's proposals for a new banking regulator charged with setting higher standards for banking practice, and a statutory Ombudsman who would be able to win redress for aggrieved customers.

"Customers have paid for these profits - while suffering a 50 per cent rise in charges in the recession years," Mr Brown said. "The Tories' gift to the banks has been inadequate regulation. We will try to ensure that customers come first."

Labour's charter for banks will also include customer contracts that would guarantee legally-enforceable rights for bank customers to have advanced knowledge of any new charges, what they are and how much they cost.

Banks would also be under an obligation to publish regularly a basket of prices that would enable the customer to make an informed choice between rival financial institutions. There would be more help for small businesses and radical measures to open up the banking system to greater competition.

An investigation into bank charges two months ago by Which?, the Consumers' Association magazine, found enormous variations between the prices levied by banks on a wide range of services, and particularly heavy charges on occasional overdrafts.

Most building societies (and the Abbey National, which is now a bank) charge customers who go overdrawn only a fraction of the amount that banks charge.

A Consumers' Association spokesman said: "Now that the big banks are back making healthy profits, there's even less of an excuse for them to charge so much. They must cut their charges."