Banks under pressure over new UK rules
London, September 14, 2013
Britain's banks are under pressure to make a success of new rules allowing customers to switch accounts within a week, if they want to avoid even tougher government demands such as an industry-wide information-sharing programme.
The new rules - which aim to ensure that all outgoing and incoming payments are automatically transferred - come into effect on Monday as part of the government's campaign to break the dominance of Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC, which between them control three-quarters of UK retail accounts.
Legislators and regulators believe a lack of choice has been a factor behind scandals such as the mis-selling of loan insurance and complex interest rate hedging products, which have cost banks more than £20 billion ($32 billion) in compensation.
The government said in June that if seven-day switching did not deliver the expected benefits it would consider more radical options, including "full account portability" - meaning an industry-wide IT platform that would allow customers to keep their account details when they switch banks.
Such a move would force banks to abandon their existing IT systems and invest jointly in a system that could be used by the whole industry.
The Parliamentary Commission on Banking Standards asked the government to initiate an independent study of the technical feasibility, costs and benefits of such a move.
Banking bosses are not keen on the idea: Lloyds chief executive Antonio Horta-Osorio recently said it would not work and be too difficult to implement.
"If they don't get it right, political pressure will mount for something more formal. It's in everyone's interest to make this work," said a senior executive at one of Britain's biggest retail banks, referring to seven-day switching.
Banking standards commission member Mark Garnier said legislators would look again at an industry-wide platform in the next two years if the switching is not a success.
He said full account portability would boost competition and protect customers if a bank failed.-Reuters