Authorities right to probe Lloyds, RBS split
The head of Britain's Office of Fair Trading (OFT) put new pressure on bailed-out banks Lloyds and Royal Bank of Scotland on Thursday, saying authorities were right to examine splitting them up.
January 21, 2011 / 08:46 IST
The head of Britain's Office of Fair Trading (OFT) put new pressure on bailed-out banks Lloyds and Royal Bank of Scotland on Thursday, saying authorities were right to examine splitting them up.
Britain's Independent Commission on Banking (ICB) is considering whether the UK's "Big Four" banks -- Lloyds, RBS, Barclays and HSBC -- need to be broken up or restructured to boost competition, following the credit crisis.OFT Chief Executive John Fingleton told parliament's Treasury Select Committee that authorities were right to consider splitting up Lloyds and RBS, which were rescued with billions of pounds worth of taxpayers' money during the crisis."I agree that consideration should be given to it," said Fingleton."I am not opining on what should be done. It is a question which should not go unanswered."Lloyds' market dominance in Britain's retail banking sector grew further in 2008 when it bought HBOS during the height of the credit crisis, in a deal brokered by the then Labour government.Lloyds has consistently sought to fend off calls for an unwinding of the HBOS deal, while RBS, Barclays and HSBC have also been fighting against moves to split up their retail and investment banking operations.Clare Spottiswoode, a member of the Independent Commission on Banking, said in November that the ICB could seek a break-up of Lloyds, while the ICB's head John Vickers also cited flaws with the deal at a conference in 2010. Vickers is expected to discuss the ICB's probe into the sector further at a business conference on January 22.Problems with switching between banks Lloyds shares rose 1.2% in early afternoon trading, while RBS edged up 0.1%.Fingleton said he still had concerns over the effects of the Lloyds/HBOS deal, in terms of reducing sector competition.However, Fingleton also told the committee that unwinding the 2008 Lloyds/HBOS deal might prove too costly for the government and would not necessarily tackle other underlying issues behind the sector's lack of competition.Fingleton said one major problem was not necessarily the size and dominance of the country's top 4 banks, but rather customers' difficulties in switching between banks."The big issue is inertia," he said."What concerns us is the inability of people to know what the price is for their bank account." Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
