Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 440 - 449)



  440. The Banking Code requires you to say. I am reading from the Banking Code that you are signed up to.
  (Mr Crosby) I believe we say three days. That is the indication we give. At the end of the day, we are not directly members of the clearing bank system; we are agents of the clearing bank system. So we will be giving an industry-wide observation on that, because we are subject to the clearing system that is run by the clearers.

  441. But you are signed up to the Banking Code?
  (Mr Crosby) Yes, indeed. We will be giving clear guidance to our customers in accordance with the Code.

  442. What are the prospects for improving this?
  (Mr Goodwin) Limited, I would say, on the basis that there is still a movement of paper. I think it is generally accepted across the industry that one of the big requirements would be to get imaging of cheques to allow the physical appearance of a cheque to be got to the centre to overcome the delays necessitated by physically bringing paper to one point and then exchanging that paper between the banks. If the cheques could be captured, perhaps in the branch, on an electronic image and be transmitted electronically to the central point at the right time, that could speed the system up. That would require considerable investment from quite a large number of players, not just the central clearing banks but basically everyone who takes in cheques. It would be my view, against the background of declining cheque volumes, and the fact that for many customers it would be swings and roundabouts as to whether they won or lost by speeding it up, because not only does the money go into their account more quickly but their own cheques go out of their account more quickly. It would not be justified in terms of investment because cheque volumes are diminishing and investment in a system which is diminishing and which will be overtaken by alternatives I think is unlikely to happen. Also, by international standards, it is not a bad clearing cycle. It is far better than the US, for example.

  443. Can I just check I have understood the answers. Everyone seemed to agree on three days—in the case of the Halifax they believe it is three days—but is that three working days or three days?
  (Mr Head) That is three working days.

  444. You did not actually say that the first time. It is a small point, but since you are required to give this information to customers, I think one was entitled to expect a certain amount of clarity and crispness in terms of the information you give to the Committee. According to the Banking Code, you have to tell your customers about the charges you make for operating their accounts, whatever they might be. Do you think customers ought to be able to compare the charges on these various accounts that the various banks and building societies offer?
  (Mr Goodwin) Yes, where there is a comparison to be drawn. Not all of the products are directly comparable. We are content with the notion of transparency and customers comparing prices.

  445. Where would a customer access that information?
  (Mr Goodwin) We publish a tariff of all our charges. My understanding is it is also sent to customers, and any time there are changes there is advance notification given of that.

  446. The Banking Code requires you to tell customers about the charges you impose. I am talking about market perspective. How does a customer find out how those charges compare across providers of equivalent products?
  (Mr Goodwin) The customers can conduct the research themselves by either getting the tariffs and comparing them or looking across the various websites, for example. Money Facts magazine springs to mind, where there is a comparison across all the providers for a wide range of products. That is available by subscription. It is not a book; it is a magazine. There are other sources of comparison, various Consumers' Association surveys. The newspapers are full of comparisons of savings rates and credit card rates. I get daily press cuttings and it is almost impossible to pick up a newspaper without seeing comparisons of prices.

  447. I would very much appreciate seeing what the quality of those kinds of information channels that you have just referred to actually is, and how easy they are to access. Perhaps you could send that. More importantly, do you not think that in a properly functioning market the customer ought to have the comparison of charges readily available to him or her?
  (Mr Head) I think that is why the CAT standard is important, because then you can put within the CAT standard those sort of charges. There is a huge amount of small print on quite a lot of bank accounts in terms of those charges, and customers cannot compare. So the CAT standard in many ways gets round that problem.
  (Mr Goodwin) I am not sure there are many other markets where there is something set up that actively makes the comparison for customers in ways different to what we do. In the motor industry you can buy almost any car magazine and it will have price tables at the back of it. If you buy Money Facts magazine, it will take you through all of the products in the personal financial market and compare them.

  448. Let us assume that the information is readily available in Money Facts magazine in a way that is readily understandable. I do not know that. You are going to let me know that, and I can check it for myself. If it is so easy, why do you not put the relevant pages of Money Facts magazine in your branches, or refer your customers to them?
  (Mr Goodwin) We would tend to short-cut that in the sense that a lot of advertising takes place as far as price distinguishing is concerned. At the moment, for example, the newspapers are full of adverts about credit card interest rates, where the various financial institutions compare various products. So I think we do quite a long way to highlight to customers the prices of our products. Not all the product features are to do with simply price. Competition takes place on a number of other features.
  (Mr Crosby) I agree with Mr Head. I think there is so much complexity and range of product in the market place. If you look at what entails giving customer information across the whole market, I think using CAT standards that are well-aligned with customer requirements gives a good benchmark, which is probably more accessible to a large number of customers. When you look at complex things like Money Facts books, first they do not cover everything, and they are quite difficult to penetrate for most customers. I would agree with Mr Head that CAT standards will be very helpful in that sense.

  449. Do you agree that Money Facts is too complex?
  (Mr Goodwin) No. I think Money Facts is as straightforward as it can be. The thing about CAT standards is there are a variety of different products in the marketplace and there is a rich array of different functionality in the marketplace. If you want to come down to a very small number of products and give them all a CAT mark, you can do that, and Money Facts will be a much simpler publication. One of the reasons that Money Facts is so complicated is that they compare products. To go back to what we said earlier, comparing the NatWest Plus account with the IF account or the Halifax current account, there would be a few asterisks around the terms and conditions. That is what makes Money Facts as voluminous as it is. The tables are quite straightforward; there is then a large amount of text explaining all the terms and conditions of the various products. To enable you to make a judgment, you need to understand the different interaction of the different terms and conditions. I will happily send you a copy of Money Facts.

  Chairman: Thank you very much for coming and answering our questions.

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