Examination of Witnesses (Questions 420
TUESDAY 30 JANUARY 2001
420. So there is absolutely no use of profiling
techniques to deter people from coming to your bank?
(Mr Goodwin) Not that I am aware of.
421. Mr Crosby, there is an allegation by the
Consumers' Association, for example, that profiling techniques
are used by banks to identify profitable customers and the ones
that they do not want.
(Mr Crosby) I think profiling is used to target the
right customers with the right products at the end of the day.
Certainly it is not part of our ethic or culture to turn customers
away. That is one of the reasons why we have 2 million basic banking
accounts, and we see the potential in developing our relationship
with almost any customer who wants to have a relationship with
us. It is a long-term investment.
422. Can I pursue the other access to services
point about availability of branches? Clearly, it was Barclays
Bank in the firing line last year. Is it not right that in the
decade before that, 1989-99, NatWest were the leaders in closing
(Mr Goodwin) I believe that is right. That was before
our stewardship of NatWest, and I have heard that figure quoted.
My understanding was that it was a previous coming together with
NatWest which did not flow through into branch closures until
the last decade. From our perspective, one of the key components
of our bid for NatWest and one of the key components of our strategy
since has been to abolish the branch closure programme which NatWest
put in place. As part of their defence, they announced that 200
branches were to close. They put that in train before we took
over in March, but we have managed to "unclose" 140
of them. Sixty-odd were just too far down the track to closure.
We have made a public commitment to abolish that branch closure
programme. We have no plans to close branches. In NatWest we actually
think the branch network is quite important, not just to the customers
who actually use those branches, but there is a growing body of
evidence that suggests that even customers who do not use the
branches view the branch network as a component of what gives
them loyalty towards the organisation. We think it is important.
There will be changes to the branch network in the sense of what
takes place in a branch and how a branch looks, but the notion
of a wholesale branch closure programme is not one that is in
423. The TV advertising campaign that we have
all watched: your commitment to make no more branch closures?
(Mr Goodwin) Yes.
424. Some people watch those adverts with a
wry smile and say it is because you have closed all the branches
(Mr Goodwin) I can imagine people would do that, but
from our perspective, the minute we obtained control, we actively
reversed branch closures. I guess we have to start from where
we start. Maybe we would not have been able to make that promise
if NatWest had still had another 1,500 or so branches on top of
the number it had. I am not here to argue the case for something
that NatWest did when we had no responsibility for it and no knowledge
of their rationale. I struggle to understand why branch closures
always seem to come along in hundreds. It seems to me that there
may be reasons why an individual branch may have to close, like
somebody wants to build a motorway through it, but I do not really
see that I can sit here and justify every branch closure NatWest
made in the past. I suspect I would have difficulty with some
425. In the USA banks are made to report to
a government office about their lending policies, their access
to service policies, and the people they will take on as customers,
and in that way get a credit rating. It is called the Community
Reinvestment Act. Do you agree that something like that is missing
in this country, Mr Head?
(Mr Head) One of the reasons I joined the Co-Operative
Bank is that they do something similar through the partnership
report, which is actually looking at all the different stakeholders
in the business. So I support that sort of thing and I would like
to see more of it. In answer to your question, yes, we probably
do need to see more.
(Mr Goodwin) We own a bank in the United States and
we are very familiar with the operation of the CRA. I do not know
that it would produce a dramatically different outcome, but there
may be more transparency about all that the bank does and provides.
But as always with these things, the devil is in the detail. There
are critics of the CRA and there are some aspects of it which
work better than others, but I do not have a conceptual objection.
426. So you are comfortable with the concept?
(Mr Goodwin) If properly applied. I do not think it
would make a huge difference to what actually transpires on the
ground in the UK.
427. Your bank has not actively lobbied the
government not to introduce such a thing in this country?
(Mr Goodwin) No.
(Mr Crosby) I am not sure that it would make a material
difference to what we do in our day-to-day business activity,
but if it helps overall perception of the industry, it would be
a good thing. I am not sure that necessarily the detail of what
happens in the American banking system particularly translates
well in the UK. It is an amazingly different banking market, but
the principle is not something that we would have any problem
428. Am I right in believing that the Halifax
and NatWest/Royal Bank of Scotland preferred the government's
proposals on money transmission systems to Cruickshank's?
(Mr Crosby) In terms of the regulation of the money
(Mr Crosby) At the time of the Cruickshank Report
we supported the suggestions around PayCom.
430. You prefer PayCom?
(Mr Crosby) We did at that time, but we are satisfied.
We are not necessarily sure that OFT oversight will in the end
be materially different, but when PayCom was in the air, we were
active in our support of it.
431. Mr Goodwin, do you have a preference?
(Mr Goodwin) I do have a preference. We did not publicly
take a position on it, but we are quite content with what is proposed
by the government, putting it into the OFT.
432. Do you have concerns about PayCom?
(Mr Goodwin) I think we would always have concerns
about a new regulator coming along. We were not entirely clear
what the problem was. I think putting it back into the OFT will
bring about the desired outcome in terms of seeing that competition
can take place and to establish that competition is there.
433. Did you or members of your staff lobby
the Treasury to not go down the PayCom route?
(Mr Goodwin) Not to my knowledge. I certainly did
not. We did not as a policy matter. We employ 95,000 people, so
I do not know whether any of them spoke to the Treasury or not,
but not as part of the Royal Bank official policy on the subject.
434. You would have been relaxed if the Government
had opted for PayCom?
(Mr Goodwin) It would have been our preference for
the Government to do what they have done.
435. Why do you prefer that to PayCom?
(Mr Goodwin) I think the issue is around competition.
I think setting up a regulator would have taken us down a different
path in an industry which is already heavily regulated as to the
detailed operation of the system. That was our preference.
436. Was not the main finding of Cruickshank
that it was in the money transmission services where the greatest
degree of monopoly was within banking, and therefore that was
where regulation to promote competition was needed?
(Mr Goodwin) I do not agree with all of Cruickshank's
findings and I do not agree with that finding. The question you
asked was what our preference was as between PayCom and the OFT,
and our preference was for the OFT, but we did not lobby the Government
for that outcome. It is not something that we played any part
in bringing about.
437. Looking at the Banking Code, in paragraph
3.2 it says, "When you open an account we will tell you how
the clearing cycle works, including when you can withdraw money
after paying cash or cheques into your account." I wonder
if the three of you could just tell me how it does work in the
case of your current accounts and what that time is.
(Mr Goodwin) The clearing cycle operates on a basis
which does not discriminate against any individual account types.
It is more sensitive to whether it is a cheque that is paid in
or cash, or whether it is a Royal Bank cheque on the Royal Bank
or a Royal Bank cheque on Halifax or someone else. Those things
influence the clearing cycle more than whether it is a type A
current account or type B current account. We would be here all
day if I tried to go into the mechanics of the clearing cycle,
but the time period depends on who the cheque is drawn on, whether
you are paying from Royal Bank to Royal Bank or Royal Bank to
Halifax, or whether it is a Halifax cheque being paid into a Royal
Bank branch to go to a Royal Bank account. Those can all affect
the clearing cycle. Some financial institutions operate different
clearing cycles. Our clearing cycle would generally be three days
across NatWest and RBoS, all things being equal, but there are
scenarios in which it would be longer, depending, as I say, who
the cheque was drawn on. There are a wide range of permutations
of length of time it could take depending on who the cheque was
drawn on, and what account it was going to be paid into. The important
point about clearing is this. There is a common perception that
somehow the bank wins because of the length of the clearing cycle.
There is no float from our perspective, so if you are paying money
into your account, when the money goes into your account, it comes
out of the other person's account on the same day. The length
of time the clearing takes is influenced by a number of factors
related principally to moving bits of paper around the country
and the speed at which some other people's systems operate. But
the bank does not make money out of the float. I do not know if
that was behind your question. That is a widely held view, which
is not actually correct.
438. May I just remind you that I am reading
from the Code here, that you are signed up to. The Code makes
it clear that you should be telling customers when they open an
account how this cycle works and when they can withdraw money.
I am asking you what do you tell people.
(Mr Goodwin) I was in the process of describing it
without going into all of the detail. There are quite a number
of permutations. The general rule is three days between putting
money in and taking it out. There are circumstances under which
it can take longer, there are circumstances under which the customer
can cause it to take less time, but three days would be the working
(Mr Head) Three days.
(Mr Crosby) I believe that is what we say.
439. What do you say? Not what you believe you
say; what do you say?
(Mr Crosby) I believe it is.