Examination of Witnesses (Questions 360
TUESDAY 30 JANUARY 2001
360. Do you think it should have been enshrined
in the banking code that those banks that do not meet the 10 days
should be subject to disciplinary measures or even financial penalty?
(Mr Crosby) I cannot comment precisely on how the
banking code would work but there is a new reference in the latest
version of the banking code on switching and complying with service
361. Would you favour financial penalties, Mr
(Mr Crosby) I think it is too early to say that at
this stage because we have a new automated system coming in. I
think that the new automated system will make a huge difference.
362. Would you be happy about that, Mr Goodwin,
or if any other bank missed the 10 days?
(Mr Goodwin) If they are the right penalties, but
I think we are focusing in here on one aspect of switching which
is the provision of information to the other bank. After you have
provided the information to the other bank, your worries have
only started because, once that information is provided, the other
bank, on behalf of the customer, then contacts all the direct
debit originators, ie all the utility companies, magazine subscriptions
and so forth that you have direct debits for. They have to change
their records to make this happen. So, where the problems all
start is usually at that end and it is not down to the banks solely
to fix this issue. What we have been talking and debating here
hitherto has been the provision of information to the other bank.
It is then the contacting of the other bank and synchronising
or co-ordinating the direct debit switching from your old bank
to your new bank that matches the transfer of your physical balance
across and where customers get upset is when the direct debit
is taken twice, by the old bank and new bank, or neither and they
start getting arrears letters from the supplier. These are the
sorts of issues which arise and I would be loath to blame the
old bank or the new bank or the utility company or whoever else
uniquely for this. So, by all means, if you are introducing penalties,
then we would have penalties in the system, but it does not always
automatically follow that they would flow to the old bank. There
are good reasonsyou and I would possibly agree that they
are not all that good reasonsas to why this is difficult
at the moment. Getting your employer to send your salary to a
different account needs to be dealt with. So, it is quite a tricky
task. The automation that we are talking about later on this year
should help with a great deal of it. There will still be the opportunity
to miss co-ordinates, some elements of switching, which will cause
customers some angst. I guess that is a function of how complex
some of the payment facilities available to our customers are.
The ability to have direct debits, BACS, standing orders as well
as cheques and so on makes it slightly more complicated around
363. I would finally like to put this to you:
we can put a man on the moon but we cannot get bank details transferred
within 10 days. Can you tell us, Mr Goodwin, as far as NatWest
is concerned, whether there will be a time in the next 12 months
or the next two years where anyone who wants to switch from your
bank can have their details transferred within 10 working days.
Can you give that guarantee here today?
(Mr Goodwin) It would be foolish for anyone to give
a guarantee like that when you have so many potential circumstances
arising as we have and as many combinations of circumstances arising.
What I have already said is that we already work to that as a
guideline. Anything which goes over that is non-compliant as far
as we are concerned and we are introducing, on a pan industry
basis, systems towards the end of this year which should automate
the transfer of the data to other banks which takes away another
layer of complexity, but there will still be issues after that,
not of NatWest's unique making or anyone else's unique making.
364. So you cannot see a time when 100 per cent
of potential transferrers will get their transfer effected, as
far as information is concerned, within 10 working days.
(Mr Goodwin) I can see that arising before you would
get to the point where all the switching would be as smooth as
everyone would want it to be.
365. I am sure you are all aware that the Treasury
published a consultation paper on standards for retail financial
products. In particular, it is proposing some CAT standards for
basic bank accounts. Could you say whether you think this will
make any difference at all. Are you already meeting these sorts
of standards? Do you think this is just a public relations exercise?
I ask that to Mr Crosby, first.
(Mr Crosby) I think it is very helpful to get clarity
around the definition of what constitutes a basic banking account.
I think we were probably the first organisation to launch basic
bank accounts 15 years ago; we have promoted them actively over
that period, we have around 2 million today and I think we took
285,000 new ones last year. So, it has been an important area
for our business. I do think that, in that area of the market,
transparency is ever more important and CAT standards help there.
366. So you welcome this.
(Mr Crosby) Yes.
367. Mr Goodwin?
(Mr Goodwin) I think it is a good thing for basic
bank accounts. Our basic bank accounts and indeed most people's
basic bank accounts meet the standards that were set down by the
OFT in relation to basic bank accounts but a CAT mark would perhaps
give a greater degree of visibility to the customers.
368. Mr Head?
(Mr Head) I am in favour of CAT standards on all products.
We have been talking a great deal about rates so far but it is
also around fees and conditions as well which quite often customers
miss. For example, that they have to pay £30 for a letter
which is written. So, we would welcome actually covering those
sorts of things as well because it gives additional protection.
369. Mr Williams?
(Mr Williams) Basic bank accounts were drawn up pretty
tightly from Policy Action Team 14, so we were pretty much following
formula. I think the social exclusion debate demonstrates that
the greatest reason for financial exclusion is people's misunderstanding
of the market and product. If there is anything such as CAT standards
which will assure people the products are straightforward and
that there are no man traps, then that is a good thing. It is
quite appropriate for basic accounts.
370. So, you all welcome these new standards.
That only leaves me with the question, why did the banking industry
not do it before and why is it so reluctant to be regulated? Mr
(Mr Crosby) I do not think we are reluctant to be
regulated in that sense. We were one of the first organisations
to argue in favour of the regulation of mortgages when we judged
it to be necessary.
371. Mr Goodwin?
(Mr Goodwin) Again, I am not sure because, from where
we sit, it does feel somewhat regulated. We are talking about
the CAT mark in the context of basic banking. There are a plethora
of products out there. I do not know how practical it is to CAT
mark every single product. There are a variety of different current
accounts and a variety of different savings accounts, mortgages
and so forth. I welcome a CAT mark because that would bring commonality
across, a one layer product, but I do not know how
372. Why do you think the banking industry did
not do it before? You all think it is a good idea. Why has it
taken so long to do it?
(Mr Goodwin) I think there has been quite a degree
of commonality as to the actual content. The banking code has
brought together quite a number of product features. It is not
within the banking industry's gift to come along and put an independent
CAT mark on itself. If you look in the banking code, the banking
code is, in a sense, a form of CAT marking. It is not as visible
as a CAT mark but the banking industry has actually done a great
deal through the banking code to come up with standardisation
across products and product features, but it is not as clear-cut
as a CAT mark.
373. Can I move on to competition in the small
business area. I know that is subject to Competition Commission
inquiry, but were you not rather shamed by the findings of the
Cruickshank report? I read one extract from it, page 151, "The
combination of charging SMEs for money transmission services and
not paying significant interest on their positive balances indicates
the provisions of money transmission services to these customers
are highly profitable" and, elsewhere in the report, he does
take the four big banks in particular to account for their failure
to have competition in this area. Do you think the findings of
the Cruickshank report were valid, Mr Goodwin?
(Mr Goodwin) Not in that respect, no. I think there
is considerable competition amongst all of the players in that
field. The fact that small businesses are charged for money transmission
accounts and are not paid interest on the balance is a feature
of the proposition which is made available to them and the basis
on which that proposition is made available to them.
374. But small businesses in Britain face much
higher charges for money transmission services than in competitive
(Mr Goodwin) I think the Cruickshank conclusion about
the overall provision to small businesses and banking was not
that. If you pick the one element that is charged for, then, yes,
that, compared internationally, was higher, but if you take the
overall proposition and interest rates and so on and charge the
same businesses, I believe the Cruickshank conclusion was actually
that it represented a reasonable proposition.
375. So you expect the Competition Commission
to give your bank and your immediate competitors a clean bill
(Mr Goodwin) It would be wrong for me to preempt any
outcome from the Competition Commission or to try and guess what
it may say about us or other banks.
376. So you are fairly relaxed about it?
(Mr Goodwin) I am not at all relaxed about it. We
are going through the process with the Competition Commission
which I guess we are getting on towards the middle of at the moment.
That process has a long way to go and I do not think it is for
me to try and pre-empt or pre-guess or speculate about the outcome.
377. But you were not worried that Cruickshank
was saying that your bank, along with others, is profiteering
from this sector?
(Mr Goodwin) I think anyone would be worried to hear
anyone say something like that about their business but I do not
happen to agree with the finding. I think that when you actually
go in and examine the facts, as the Competition Commission are
doing, it is possible to come to other conclusions. It remains
to be seen which conclusions the Competition Commission will actually
378. Do any of the other witnesses have major
business areas in small businesses? I believe they do not. Would
any of you like to comment on Cruickshank's findings on small
(Mr Crosby) I will. I think that we broadly concur
with them. If you look at the factors that have brought about
intensifying competition in our core mortgage and savings market
and are now moving into the retail banking market and I will summarise
themand we have talked about it already today. Firstly,
the ability to easily port the product from one provider to another;
secondly, the transparency and openness of charges as per CAT
standard; thirdly, the range of choice of providers and perhaps
even the service channel, the choice between coming into a branch
or to telephone. All of those are matters which have brought about
terrific investigation of competition first in mortgages and savings
and now in banking. Pretty well none of them apply in the SME
sector and I think that must be the issue.
379. So why do you think banks like NatWest
are so complacent and so relaxed about this?
(Mr Crosby) I cannot comment on that specifically;
I cannot comment on internal attitudes of competitors.