Examination of Witnesses (Questions 880-895)
MR DYFRIG
JOHN, MR
GARY HOFFMAN,
MR JAMES
CROSBY, MR
MIKE FAIREY
AND SIR
FRED GOODWIN
18 MAY 2006
Q880 Chairman: For example, you and
I were discussing in my own constituency the late Rose Dorman
and Dalmuir.
Sir Fred Goodwin: That is a classic
case in point. Typically women are involved in leading the movement
and it is typically connected with churches, so that anchor in
the community seems to be very important, but it is hard work
and central services agencies can take a lot of that burden, a
lot of the administrative burden, a lot of the training burden
and so forth, and that was one of the recommendations. There are
quite strong views within the credit union movement in the UK.
There is ABCUL, the existing body, and other parts of the movement
who do not see eye to eye with ABCUL and somehow it got lost amongst
who was going to be the pre-eminent support organisation, which
I think was a pity.
Q881 Chairman: We will need to do
more work on the credit union area regarding financial inclusion.
Sir Fred Goodwin: Yes.
Q882 Chairman: I know the difficulties,
and I have discussed that. Gary, the Association of British Credit
Unions welcomed the sponsorship by Barclays of the PEARLS programme.
Can you tell us how this helped credit unions develop?
Mr Hoffman: Yes. The PEARLS programme
is a piece of kit, a bit of software, that enables the credit
unions to be more professional about the way in which they manage
some of the assets and liabilities they have and some of the ratios,
and what it has helped them to do is reach more customers in their
particular community. We have helped 50 out of 500 so far, and
have got an on-going programme in them, and I know that for those
unions it has helped a lot.
Q883 Chairman: And ABCUL also noted
that the PEARLS programme could be usefully extended to many more
credit unions working in areas of high financial inclusion. Do
you have any plans to extend the number of credit unions which
you support?
Mr Hoffman: Yes. We have a programme
running through this year and next.
Q884 Chairman: Good. Moving on to
the Money Transmitters Association, they gave us evidence and
we questioned the Financial Services Authority, John Tiner and
his colleague, last week on that, but evidence from the Money
Transmitters Association states: "Put simply the banks are
denying bank accounts to money transmitter companies registered
with HMRC without any good reason". The Financial Services
Authority has called for a risk-based approach to money-laundering
regulations, but have your banks interpreted this requirement
in terms of how you would operate a business account for a small
money transfer organisation?
Mr Fairey: I was slightly taken
by surprise by the question. I think the money transmitters are
unregulated but registered by HM Revenue and Customs, which is
not the same obviously as being regulated for money laundering
purposes, and there is a considerable risk, so I think the issue
is around that risk and the quantum of regulation supporting the
transmitter.
Q885 Chairman: I presume you would
say it was not true that banks are denying bank accounts to money
transmitter companies, but HMRC regulates individual money transmitters
but does not pass on details of their inspection to anyone, or
even confirm that an inspection has taken place. Now, if regulators
were sharing this information with banks, would it enable you
to better judge the risks associated with a particular company?
Does that seem self-evident?
Sir Fred Goodwin: I do not think
it would do any harm but the point is they are not looking at
it from a money-laundering perspective there; they are also post
facto, so it helps, but I would not think it would again be a
panacea. This is a very high risk area.
Mr John: I think the onus is on
us in these cases to make sure that the money transmitter organisations
have in place policies and procedures that comply with money laundering.
It is quite specific. As such, that is what we have to do whenever
they come to us. Clearly we do open accounts for these people.
Q886 Chairman: The FSA have been
back on this issue and are working with us on it. James, you have
experience of operating the Savings Gateway scheme that provided
matched funding to encourage low income consumers to save, and
your submission notes that it allowed your branch staff to learn
about the needs of these customers. I have to say that in informal
discussion with Elaine Kempson she was glowing about the Savings
Gateway.
Mr Crosby: We have rolled this
out over two years and I think we have now done 24,000 of these.
From our point of view one of the keys is that our colleagues
in the front line are talking directly to these customers and
understanding exactly their circumstances, and that is very valuable
to us.
Q887 Chairman: But you would like
Government maybe to have a Savings Gateway too, and match funding?
Mr Crosby: I think so, yes. It
would be an excellent product. There will be a full analysis done
after the end of this pilot which we have been running with the
Government, but it seems to me that a lot of tax incentives in
the past have not always been as successful as anyone would have
liked in encouraging new saving rather than rotating existing
savings, and I do not want to prejudge the review but I think
this is an initiative that really is all about encouraging new
saving and encouraging the saving habit, so it is probably worth
supporting.
Q888 Chairman: Why have no high street
banks signed up to provide stakeholder savings products through
the FSA's "Basic Advice" regime?
Mr Crosby: Answering on behalf
of us I think we do; we just have not classified them as stakeholder
products. For a number of years we have provided simple investment
products with simple charges, and we provide full advice on them
because we think that full advice is a superior proposition on
those basic products than stakeholder-based advice.
Q889 Chairman: What I am getting
to here is the FSA's "Basic Advice" regime. Is there
anything they could do changing that that would encourage you
more?
Mr John: I think when you are
giving advice you generally wish to give some options to the customer.
Unfortunately in this case it is only one product and, therefore,
you need to be very happy and comfortable that you are able to
give best advice on a customer's needs. That is at the heart of
it. There is only one product and quite often when you give advice
on investments you say "Here is a range of products, where
is your appetite on risk?" and so on.[3]
37
Q890 Chairman: On the question of the
working party and cash machines we had a discussion earlier on
and I am very grateful for that, but one area that is worth examining
is how we could use the LINK interchange fee arrangements to help
keep the last free ATM in low income areas. Would that be a worthy
area to look at?
Sir Fred Goodwin: We have to look
at the whole thing so we should look at the whole thing.
Jim Cousins: Mr John, and I think Mr
Fairey in a slightly different way somewhat later, said that they
have broadened the attributes of the basic bank account somewhat,
and without going verbally through all our witnesses I would very
much appreciate knowing how each of them have dealt with issues
like buffer zones, default charges, people who want repeat accounts,
repeat statements and things like that. I would appreciate knowing
all of that—not now, but in writing.
Q891 Peter Viggers: With your international
connections, what is the burden of social cost that you feel in
this country compared with the burden of social cost in other
countries? I have asked about this before and I did not get a
really specific answer, but what I am trying to assess is, if
this were a shareholders' meeting, what is the social cost of
maintaining smaller bank accounts, promoting inclusiveness in
this country compared with others?
Sir Fred Goodwin: It is not a
burden; that is point 1. Point 2 is that because it is not viewed
as a burden it is not separated out in that sense. I will send
you a copy of our corporate responsibility report where we set
out a number of things that we do but they are not all costed
out. We do not get a lot of heat from shareholders on this; in
fact, I do not think we get any heat from shareholders on this.
Mr Hoffman: I think the shareholders
recognise it as an important part of doing business.
Q892 Chairman: So it is a business
opportunity?
Mr Hoffman: Yes.
Chairman: Andy?
Q893 Mr Love: I do apologise for
having to slip out; I was called into the Chamber so I may have
missed this, but I wanted to ask a general question about the
relationship between your banks and what they now term the third
sector credit unions in CDFAs. This may have come up already but
really I would have thought, from this Committee's point of view
or certainly as we view it, that there should be a strong partnership
that exists between the third sector and the banks, mainly because
the third sector can deliver a service that you do not particularly
want to deliver but you can help them to deliver. Now, from the
evidence I have seen there is not that strong partnership; the
banks are not getting involved with CDFAs that much, and I am
sure you have gone into the task force but since the task force
report on credit unions that has not been carried forward. How
do you see your relationship in the future with the third sector?
Sir Fred Goodwin: We did, indeed,
cover a bit of this but I would be happy to go over it again.
I think it was an opportunity missed but that is now ancient history.
Our involvement now is reasonably fragmented across the industry.
We have over the piece tried to work with ABCUL and we have sponsored
some research to try and find other ways to go forward, and we
are now involved with a number of credit unions but I would be
the first to acknowledge it is reasonably fragmented around the
country. We are working at, if you like, a tactical level rather
than a strategic level, but were an opportunity to present itself
to resolve that I would be happy to do it.
Q894 Mr Love: Do any of you feel
that you have a really strong working partnership with any parts
of the third sector, and can you tell us about it?
Mr Hoffman: We did cover this
when you were out of the room but we think we have a strong relationship
with ABCUL and a significant number of credit unions through the
PEARLS programme that we have put in place, so I do think we have
a good relationship.
Mr Love: Thank you.
Q895 Chairman: Can I thank you for
your attendance this morning; it has been very helpful to us.
We have focused on people who have not had the opportunity to
open up basic bank accounts and have met them, and that has resulted
in them maybe not having jobs or losing jobs as a result, and
we are focusing on the barriers to opening that, but more than
anything else we are focusing on the need for a joined-up approach.
I think it is generally agreed that there has not been that joined-up
approach and that is why we have Government Ministers from three
departments in on Monday to look at this and where the Government
and yourselves can work together. The Post Office Card Account
and other matters are big issues and we do not have much time
on those, so it is very important. I would like to congratulate
you for your work with the Government in terms of financial inclusion
and the work that you are doing with community groups, and we
have witnessed that as we have been about, and I think it is very
helpful to us to try and have this all-inclusive financial inclusion
report, which focuses, as I said, on a joined-up approach. I think
this morning's meeting has been very good; it has been hugely
civilised; it would do grace to any of your board room meetings,
and I hope you take that message back! Thank you very much. One
last matter; there is only one member here who will not be back
at some stage, Mr James Crosby. James, you have been very helpful
to the Committee; we know you are retiring to do other things,
and for your help with the Committee we thank you and we wish
you every success in your third sector employment on leisure!
Mr Crosby: Thank you very much.
3 37 Note from Witness: HSBC offers 3 of the
4 stakeholder products-Cash ISA, Stakeholder Pension and Stakeholder
Child Trust Fund (CTF). HSBC does not offer basic advice or a
stakeholder investment product as we believe that the limitations
of basic advice, and the restricted product range for investments
under basic advice (one product), do not meet important customer
needs. Back
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