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Monday, 20 March, 2000, 17:42 GMT
Banking report: What they said
The government's review of banking services is highly critical of the service UK banks give their customers. The head of the review, Don Cruickshank, wants to see an examination of how small businesses are treated, better payment systems and improved complaints handling. BBC News Online assesses reaction to the report.


The banks
Lloyds TSB said it saw no need for another competition inquiry of the services provided to small and medium sized businesses.

The bank said the report had not identified any area where businesses were disadvantaged.

But it did agree with calls for greater transparency in the UK banking industry.

Lloyds TSB's deputy chief executive Mike Fairey said the Cruickshank report showed UK banks fared well in international comparisons.

"He did a review looking at banking services and charges in the UK in comparison with France and Germany, Australia, Canada and the US, and he has concluded that overall consumers get a reasonable deal," commented Mr Fairey.

The British Bankers' Association also argued that the UK had a competitive and efficient banking system.

"There's plenty of variety in the marketplace and plenty of varying levels of pricing," said spokesman Tim Sweeney.

"There is a transparency issue and, as I have said in the past, we have to be better at transparency and helping people to choose effectively, but there are plenty of chances for differentiation."

Bank customers
The National Association of Bank Customers welcomed the report's findings.

"The big issue is whether or not now the government is prepared with political will to take on what the findings of the report are," said the association's Adrian Graves.

He was pleased by Mr Cruickshank's proposal for tougher regulation across the board.

"We have said for some time that we need a regulatory framework and we welcome that. It's long overdue," said Mr Graves.

Small businesses

The news that the Competition Commission will look into bank profits was welcomed by Stephen Alambritis of the Federation of Small Businesses.

"The banks have made 1.8bn of profits on the backs of small businesses of which 500m was really unnecessary and could have stayed in the coffers of small businesses," he said.

"We hope all the evidence will be allowed out, that cheques will be cleared much faster, that there will be actually be a contract between small businesses and the bank where no unilateral action can be taken and that other entrants into the market - like building societies and the new internet banking services - are allowed in to provide more competition."

Mr Alambritis added: "The other thing we want is the tariff for small business to be published so the businesses can actually work out for themselves what they should be charged."

Ian Fletcher of the British Chambers of Commerce commented: "It's not a case of the service itself - the service has improved dramatically from the banks.

"It's the charges that people are incurring for those and that is due to a lack of competition."

Consumer groups
The Consumers' Association has been vociferous in recent months on a number of issues under the "rip-off" umbrella.

Spokesman Phil Telford commented: "It's a lot of money that people and small businesses are being overcharged year by year for accounts which are not really providing the sort of services that in the 21st century people expect and demand."

He was hoping the government would now take the recommendations on board.

"From research we have done showing how long this has been going on, we hope for quick action," he said.

"There are powers already in existence without setting up new regulators for the government to step in and look to introduce more competition in the sector."

Staff

The finance union UNIFI expressed its concern that the report could lead to more job losses in the banking industry.

Joint general secretary Ed Sweeney said he welcomed the introduction of an element of competition, but felt the implications would inevitably be detrimental to banks' profits.

"Historically, any such moves have seen staff paying, through job losses, and customers paying through continuing branch closures," he said.

"The job creation for a few new watchdogs could result in hundreds more job losses in the industry."

The markets
Although the report's findings were fairly negative, the stock markets have had plenty of time to factor that into share prices.

Some banks fell in initial trading, but gradually picked up during the day.

Barclays advanced 16p to 15.19 and Bank of Scotland added 33.5p at 709.5p.

But Lloyds TSB was volatile, ending the session unchanged at 601p after swinging from lows to highs early on.

Mr Cruickshank's report received a mixed reaction from analysts.

"It's slightly milder than it was expected to be," said Jon Kirk of Fox Pitt Kelton. "He's left personal customer banking reasonably well alone and I'm surprised he hasn't gone further into the portability of personal accounts," he said.

Merrill Lynch analyst Martin Green commented: "We thought it was going to focus a bit more on the personal market, but he has said that since he started the report competition has been coming in thick and fast."

See also:

20 Mar 00 | Business
20 Mar 00 | Business
25 Feb 00 | Business
28 Sep 99 | Business
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