On the issue of switching bank accounts, the ICB lost its nerve. It merely proposed a redirection service, rather than a more radical requirement for customers to maintain account and sorting code numbers – account number portability – as mobile phone consumers do when changing phones.
In a few months, up to three million Lloyds Bank customers – one in five of its customer base – may wake up to find that they have been compulsorily transferred, without their consent, to another bank, which in all likelihood, has no branch network.
This European-imposed requirement is the price of allowing the bank to access temporary funding from the Government, but tramples on consumer rights. It is more usually associated with economies like North Korea.
Those who think they will lose out, or wish to stay with their existing provider, can close their accounts and move elsewhere. But they will find it a cumbersome and tedious process. Banks have profited from the significant hassle in moving, often cited as leading to 'customer inertia', which is why, in the UK, an individual is more likely to switch their spouse than their bank account.
The parallel with the telephone industry is striking. In 1991, phone regulator Oftel tried to introduce number portability for phone customers – in the end it took a monopolies and mergers report for portability to be introduced in 1995.
The answer to encouraging and promoting greater competition in the retail banking sector is to be bold and force through account number portability for the whole industry. The technology is now clearly available, but the ICB has shown that the will is lacking.
Simon Culhane is the chief executive ofthe Chartered Institute for Securities & Investment.