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Abbey Owner Throws Down The Banking Gauntlet | banks | abbey | supreme_court | Kleinman | Sky News Blogs
Abbey Owner Throws Down The Banking Gauntlet
Mark Kleinman November 19, 2009 7:10 AM
In recent weeks, ministers have been paving the way for a new era of competition in high street banking as large chunks of our taxpayer-backed banks are prepared for sale.
And today, just as details of a new consumer personal finance education body are to be unveiled (in the Financial Services Bill), one of Britain's biggest high street banks is to make an announcement that's likely to make its rivals sit up and take notice.
I’m told that Santander of Spain (owner of Abbey and rescuer last year of Alliance & Leicester and parts of Bradford & Bingley) is to make a bold move: it will unveil a current account that incurs no fees whatsoever. That means no charges for being overdrawn, none for using cash machines abroad, no foreign exchange fees and no charges for contentious things like bounced cheques and missed direct debit payments.
At a time when the consensus among banking experts is that increasingly tight margins will become the norm for high street lenders (witness the explanation for recent job cuts at HSBC and Royal Bank of Scotland (RBS)), this is brave stuff.
As I understand it, Santander’s Zero Current Account (the ‘Zero’ refers to the fees, by the way, rather than the interest rate) will be available to any Abbey mortgage customer (of which there are about 2m at the moment).
Few of the major international banks seem to have emerged more robustly from the global banking crisis than Santander.
In Britain, that was vividly demonstrated as lender after lender (Northern Rock, HBOS and RBS) sought comfort in the arms of the State. Already the owner of Abbey, Santander capitalised on its position, snapping up A&L and B&B, and now has 25m UK customers. Britain now accounts for 16pc of the Spanish bank’s group profit.
Santander will argue that it has the firepower to do this because it has more efficient operations than its competitors. Its boss is likely to say that the bank is offering consumers a new deal which reflects the volume of business they conduct with it. That sounds a lot like one version of the ‘contract’ between banks and society for which ministers have been pushing.
The timing of today’s announcement is not coincidental. Next week, the Supreme Court is scheduled to make its judgement about whether the Office of Fair Trading has the power to decide whether bank overdraft fees are fair or not. That follows appeals by the banks against previous rulings by the High Court and the Appeal Court.
This dispute has been going on for years and has affected well over 1m British customers. Next week’s ruling will be, in that context, very significant.
The announcement also comes at a time when ministers are desperate to promote competition in retail banking. They have suggested that disposals being made by Lloyds Banking Group, Northern Rock and RBS will enable the creation of three new retail banks.
Today’s announcement undoubtedly throws down the gauntlet to Santander’s rivals. It’s a pre-emptive strike that on the one hand could be argued will make it even harder for new entrants to come into the market and compete. Equally, it’s a bold move to gobble up market share that looks to have no obvious catch for consumers. It will be interesting to watch ministers’ (and consumers') reaction.
Abbey Owner Throws Down The Banking Gauntlet
Mark Kleinman November 19, 2009 7:10 AM
In recent weeks, ministers have been paving the way for a new era of competition in high street banking as large chunks of our taxpayer-backed banks are prepared for sale.
And today, just as details of a new consumer personal finance education body are to be unveiled (in the Financial Services Bill), one of Britain's biggest high street banks is to make an announcement that's likely to make its rivals sit up and take notice.
I’m told that Santander of Spain (owner of Abbey and rescuer last year of Alliance & Leicester and parts of Bradford & Bingley) is to make a bold move: it will unveil a current account that incurs no fees whatsoever. That means no charges for being overdrawn, none for using cash machines abroad, no foreign exchange fees and no charges for contentious things like bounced cheques and missed direct debit payments.
At a time when the consensus among banking experts is that increasingly tight margins will become the norm for high street lenders (witness the explanation for recent job cuts at HSBC and Royal Bank of Scotland (RBS)), this is brave stuff.
As I understand it, Santander’s Zero Current Account (the ‘Zero’ refers to the fees, by the way, rather than the interest rate) will be available to any Abbey mortgage customer (of which there are about 2m at the moment).
Few of the major international banks seem to have emerged more robustly from the global banking crisis than Santander.
In Britain, that was vividly demonstrated as lender after lender (Northern Rock, HBOS and RBS) sought comfort in the arms of the State. Already the owner of Abbey, Santander capitalised on its position, snapping up A&L and B&B, and now has 25m UK customers. Britain now accounts for 16pc of the Spanish bank’s group profit.
Santander will argue that it has the firepower to do this because it has more efficient operations than its competitors. Its boss is likely to say that the bank is offering consumers a new deal which reflects the volume of business they conduct with it. That sounds a lot like one version of the ‘contract’ between banks and society for which ministers have been pushing.
The timing of today’s announcement is not coincidental. Next week, the Supreme Court is scheduled to make its judgement about whether the Office of Fair Trading has the power to decide whether bank overdraft fees are fair or not. That follows appeals by the banks against previous rulings by the High Court and the Appeal Court.
This dispute has been going on for years and has affected well over 1m British customers. Next week’s ruling will be, in that context, very significant.
The announcement also comes at a time when ministers are desperate to promote competition in retail banking. They have suggested that disposals being made by Lloyds Banking Group, Northern Rock and RBS will enable the creation of three new retail banks.
Today’s announcement undoubtedly throws down the gauntlet to Santander’s rivals. It’s a pre-emptive strike that on the one hand could be argued will make it even harder for new entrants to come into the market and compete. Equally, it’s a bold move to gobble up market share that looks to have no obvious catch for consumers. It will be interesting to watch ministers’ (and consumers') reaction.
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