HISTORIC PRESS RELEASE : Consultation of independent review of banking services [January 1999]

The press release issued by HM Treasury on 25 January 1999.

Don Cruickshank today launched his review of UK banking services with a consultation paper setting out the approach the review will take. It asks a number of questions about the scope of the review on which he would welcome early views.

These will help focus the substantive work of the competition analysis of economic markets which forms the core of the review, alongside the views of the banking sector, consumer groups and other interested parties.

Announcing the consultation, Mr Cruickshank said:

“Customers are best served by competitive markets operating  in a strong, stable macroeconomic environment. The core of  the review will be a thorough competition analysis of the economic markets in which banks operate. This is underway.

“There are no predetermined answers, but there are a number of  issues of obvious interest which we shall be looking at. Some warrant investigation without waiting for the outcome of the analysis. These include credit for small businesses, money transmission systems and credit cards.

“The consultation document is quite technical. It may not appear at first sight as a rallying cry to address the things consumers have said they are concerned about: overcharging, poor service, and failure to understand the  needs of small businesses. But alleged failings like these can only be addressed by first understanding the competitive structure of the industry.

“I look forward to responses to the consultation document and a continuing dialogue as work progresses. To get the widest and fastest possible exchange of views, I am pleased to announce that we have set up an internet website where research results and the views of respondents, unless confidential or dealing with individual cases, can be seen and commented on as the review progresses. “

The terms of reference of the review are to:

• examine the banking sector in the UK, excluding investment banking;
• examine the levels of innovation, competition and efficiency in various sub-markets, including SMEs;
• look at how these levels compare with international standards;
• consider whether there are options for change which the industry or Government should consider.

The review proposes to focus on the services provided by the banking sector rather than the institutions or the specific products they offer. As well as banking services themselves, the review also proposes to consider the relationship between these and the economic cycle, and the potential impact of the single currency and the single market in financial services.

There are also issues being addressed elsewhere which lie outside the remit of the review, but which it will take into account and may in turn inform. These include consumer information and redress,  and financial aspects of social exclusion.

Don Cruickshank’s final report is expected to be available for the Government to consider towards the end of the year.