Guernsey: UK Banking Proposals A "Damp Squib"

Robert Lee, Tax-news.com, London

14 August 2000

There is talk of the UK government clamping down on the major banks but Guernsey banks are not unduly concerned. Chancellor Gordon Brown is mulling a package of measures designed to improve competition in the banking sector, the initiative stemming from a report criticising the lack of competitiveness in the industry, but the proposed measures have probably not had the effect that Brown desired. They are considered across the banking industy to be something of a damp squib.

Any effect which new regulations may have on the banking industry in Guernsey can be attributed to the UK's government-appointed watchdog Don Cruickshank, who has condemned high street banks' profits and said that people were paying too much for their banking services. However, the proposed measures are sketchy to say the least. There are to be no restrictions on mergers, which could mean more bank mergers in the future, and the suggestion of a windfall tax on bank profits has not materialised as anything concrete. There will be a new set of CAT standards (benchmarks for Cost, Access and Terms set by the government), and the government is also considering legislation to create a payments regulator to oversee the payments system for cheques and credit cards. There are also plans to review self-regulatory measures like the Banking Code.

Ken Gregson of Barclays Bank in Guernsey was surprised about the suggestions for changes to the payments system and said: 'Our opinion is that the UK has a very efficient cheque payment system and, certainly, something that compares well with most of the world. Our system has always been ready and able to adapt to change.' Mr Gregson said that Barclays in Guernsey would be waiting to see what the government proposals really entailed: 'We welcome any initiatives that lead to increased openness and fairness. As far as the improved competition aspect is concerned we are committed to consultation and hope that the government approaches this with a similar attitude.'

John Davies of Guernsey's HSBC Bank said of the possible changes: 'The proposals for new regulation just follow the drive towards transparency when providing products and services to a large customer base.'

A spokesman for NatWest Bank in Guernsey said that the bank was considering the proposals and looking at the possibilities that may arise: 'The ideas about the cheque clearing arrangements are interesting. We have one of the most sophisticated cheque clearing systems in the world in the UK, as anyone who has ever tried to get a cheque cleared in Italy or the United States would confirm. There it can take weeks not days to clear a cheque.'

It seems though the Chancellor has his heart set on his competition package. He stated: 'Banking services, like every other sector of the economy, need to be exposed to the full rigours of competition. We aim to achieve this through reforming regulation, opening up payment networks and eliminating any special treatment. We are determined to drive competition forward and deliver real improvements for personal and small business customers.'

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