Banking reform: Why moving your money matters

Joel Benjamin

On Friday, Labour leader Ed Miliband announced plans to break the monopoly of the big five UK banks, creating two new ‘challenger banks’ in a policy move designed to tap into raw public anger following the banking crisis, recent scandals and continuing failure to tackle the toxic bank bonus culture.

Miliband’s speech was delivered at the University of London’s Senate House, as the Financial Conduct Authority announced yet another banking inquiry – into allegations of systemic fraud against RBS, this time involving struggling SME businesses.

Labour’s calls for a market cap in retail banking and more competition in the sector are welcomed: 2.4 million people switched accounts in 2012/13, and in September, seven-day switching made it even easier for customers to switch.

The Payments Council this week released figures showing more of us than ever before are moving our money, with a 17 per cent increase over the last 3 months, as compared with Q4 2012.

Relative to countries such as Germany with a strong regional banking network however, the UK is still dominated by large too-big-to-fail banks, and lacks real competition and alternative banking models.  As a major stakeholder in two of the UK’s largest banks, the government has a unique opportunity to make the banking sector serve society instead of continuing to serve itself.

In the UK, just five banks RBS, Lloyds, HSBC, Barclays and Santander enjoy 90 per cent market share (and it’s important to note the big five banks currently own the back-end payments system, preventing new bank competition).

In Germany by comparison, 2000 banks compete for 70 per cent market share.

In public sector banking, the UK market is now even more consolidated, with the Cooperative Bank recently surrendering its market leading 35 per cent share, leaving only the ‘big four’ of Lloyds, RBS, HSBC and Barclays to service hundreds of councils, housing associations, universities and NHS Trusts.

Labour’s bank policy announcement follows the November release of the Tomlinson Report, which outlined systemic fraud at state-owned RBS – accused of liquidating hundreds of distressed SME businesses for profit, via its Global Restructuring Group and West Register property arm, prompting Lawrence Tomlinson to publicly call for the break up of taxpayer-owned RBS.

Miliband has already said he would like to usher in an era of regional and local banking as a way of rebalancing the economy away from finance, and encouraging greater growth outside London and the south-east, possibly by breaking up and re-tasking taxpayer owned RBS or Lloyds to lend to SME’s.

However, it’s important we do not fall into the trap of leaving financial reform solely in the hands of our elected politicians. While we wait for details of Labours ‘challenger banks’ to emerge, we should encourage citizen-led bank reform by saying goodbye to high street casino banking, and supporting one of the many alternative banks that already exist.

Citizens would be well informed to take matters into their own hands, moving our money to a financial institution that shares our values and uses our money wisely to invest in a more sustainable and equitable vision of future for us all.

Thankfully the Move Your Money bank switching scorecard has done the hard work in ranking 71 banks and building societies for you.

As we witnessed with political rhetoric on bank reform in the years since the crisis, there’s a major difference between what politicians say in opposition, and actually do when, and indeed if, they are elected to power, walking the tightrope of pleasing party donors on one hand, and an increasingly fed up electorate on the other. Don’t delay, make your own statement and move your money today!


  1. Paolo Sanviti

    Basic goods – ethical concepts for ethical economy – moral banking

  2. Benjamin Profane

    Most of the ‘banks’ listed in the ‘Move Your Money’ switching scorecard don’t offer current accounts.

    Inf fact, the whole article is a lazy jumble. What are we exactly talking about here? Business accounts and lending? Personal finance? Whether or not I can beat the zero fees I pay on my current account? Bankers’ bonuses? SME lending? Investment banking? Division of bank operations? I’m sorry, but they are all very different things and cannot be lumped together like this unless you are only interested in lazy political messaging.

    Most people don’t switch their current account because there is absolutely no point. There could be 5000 banks but unless they start paying me money to have the account why would I change? If we are talking about personal finance in general (including saving) then there is a wide open market with a range of providers and in my experience people regularly switch (e.g. mortgage provider). My HSBC account doesn’t stop me from having an ISA with Halifax, a mortgage with a building society and fund management with JP Morgan.

  3. Brendan Caffrey

    How to nationalise, and not nationalise, the banks.

    Nationalising can take many forms. But the obvious one is to install civil servants on to boards of Directors. This mild form of nationalisation has not been taken by recent Labour Party policy. Instead the proposal is to ask the Competition and Markets Authority to investigate the possibility of a form of cartel between the big 5 banks.

    By removing this technical task from the Labour Party, there will appear to be an objective set of recommendations that have apolitical legitimacy. The next step would be for the above Authority to implement these recommendations on the banks. This leaves the banks as private companies maximising their profits for their shareholders. This is how not to nationalise.
    In the current political climate, with an election to win in 2015, there is a need for some creative thinking about nationalisation, and it’s implementation. If the Labour Party retains some distance from actual implementation this may be wise in terms of getting votes. Also, it avoids the traditional fear that the Party is not seen as very efficient in managing the economy.
    However, what the Party does after winning an election in using it’s new authority is crucial. Depending on the technical recommendations, it could implement, some, none, or even add new controls. This may yet not be seen as nationalisation. But it is on the way!

    The detail of which controls to adopt is important. But more important is to have at least some controls that have a good chance of working in the short term. This begins to deal with the traditional scepticism about Labour managing the economy. Then more radical controls can be attempted. For example, taking a share of banks’ profits annually would produce capital for a government controlled bank. With this annual income the government could do various popular things; reduce income tax for the low paid, give money to local authorities to build new houses etc.. Also the new bank would be seen as increasing competition.

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