Examination of Witness (Question Numbers
392-433)
Benny Higgins
7 December 2010
Q392 Chair: I am
very grateful to you for coming in. I do not know how much of
the earlier evidence you heard, but we have just had a rather
interesting exchange with respect to some of your evidence. If
I can just read the relevant passage, you said, "The established
banks routinely share current account data on income and expenditure,
as well as wider product holdings, through a closed user group."
Could you tell us what is this "closed user group"?
Benny Higgins:
Yes, I can indeed, Chairman. Unequivocally, there is a closed
user group made up of the large banks and some of the other banks.
The eligibility condition is that you need to have one million
current accounts and it's used primarily to assess affordability
because clearly, in order to assess affordability, you need to
know the income and expenditure of the customer involved. So it
certainly is a closed user group and that is the eligibility.
Q393 Chair: Have
the OFT looked at it?
Benny Higgins:
I'm not aware of that. They may or may not have.
Q394 Chair: Have
you brought it to their attention?
Benny Higgins:
I haven't personally but I'm sure they're aware of it, but we
certainly can do that.[1]
Q395 Chair: Bearing
in mind that you are a would-be market entrant, do you not think
this is something you might want to have high on their agenda?
Benny Higgins:
Yes, no, absolutely, I agree.
Q396 Chair: So I
am rather surprised that you have not raised it with them.
Benny Higgins:
They are aware, certainly, but we certainly will pursue it further.
Q397 Chair: What
should be done about it?
Benny Higgins:
I think that it's not about sharing proprietary marketing information,
which would be, I think, inappropriate for competitive purposes.
What it's about is understanding affordability and that is, I
think, for the greater good. And so I think anyone who is lending
in the UK should have access to that affordability data.
Q398 Chair: Do you
think it is reasonable and possible for consumers to be told how
much they are being charged on their current accounts, the real
charge, including the interest foregone?
Benny Higgins:
Well, what's quite interesting is that I think it's the great
Scottish enlightenment thinker, David Hume, who said that a wise
man proportions his belief to the evidence. Well, let's look at
the evidence as far as your question is concerned. The OFT found
that, in 2006, £8.3 billion of revenue came from consumers
to the banks in respect of personal current accounts. That number
rose to £9 billion in 2009. The split of that revenue was:
50% came from credit balances, and 38% from unarranged borrowing
from fees or rates—mainly from fees—and the balance
came from a variety of other sources. I wonder if anybody in this
room knows how much they contributed to the £9 billion. So
it seems to me that—
Chair: Sorry, I wonder how much—
Benny Higgins:
How many people in this room would be able to say, even as a wild
guess, how much they contributed to the £9 billion in 2009.
So what I would say—
Q399 Chair: I asked
a senior executive of Lloyds that question this morning and she
was unable to do so.
Benny Higgins:
I think you'll find that very few people are able to do so and
I think it strikes at the heart of the issues around competition
within current accounts. The issue is around transparency—transparency
and also the perceived and real obstacles to switching.
Q400 Chair: And are
you going to provide that transparency unilaterally?
Benny Higgins:
Within Tesco Bank?
Chair: Yes.
Benny Higgins:
Yes. Well, we plan to launch current accounts and at the moment
we're working through the way in which we should present current
accounts to customers. We'll follow the ideology that has always
been true within the core Tesco business. We follow the customer.
We're setting out to be simple, to be transparent and very straightforward.
That's certainly our focus.
Q401 Chair: So can
we expect customers to be told what they are really being charged
including interest foregone when banking at Tesco?
Benny Higgins:
Absolutely, yes, we operate in a competitive environment. I hope
that it won't be too long before the initiatives that have been
driven by the OFT will in fact drive much greater transparency
across the businesses.
Q402 Mark Garnier:
Barriers to entry in terms of the regulatory process: we had Hector
Sants and Lord Turner in a couple of weeks ago and I was getting
stuck into them on this particular point. They absolutely categorically
denied that the regulatory authorisation process is a barrier
to entry. How are you finding it? Do you agree that it is no problem?
Benny Higgins:
If you don't mind I'd like to broaden the question to say what
are the barriers to entry.
Mark Garnier: Yes, of
course.
Benny Higgins:
In fact, I think a much more useful expression is "what are
the barriers to success?" "Barriers to entry" sound
like a very, if you like, black and white outcome, but "barriers
to success" discourage new entrants. If we were to identify
the number of issues that would act as potential barriers to success,
I would list them as follows.
Firstly, financial services is a business where it
is necessary to invest in a huge amount of infrastructure, whether
it be IT or specialist skills. It does mean that it's unlikely
that a new entrant can be very successful and be very small, whereas
in other businesses it's possible to be small and well-formed
and successful. So there has to be an aspiration for some scale.
The second is around regulatory issues. Quite rightly, the capital
requirements are much greater than they have been before and they
will act as a discouraging factor for potential new entrants.
The regulatory process itself, I wouldn't say, is a discouraging
feature in respect of how the regulations—
Mark Garnier: You wouldn't say.
Benny Higgins:
I wouldn't—in the way it's pursued. However, the FSA themselves
have acknowledged that the level of intensity of regulation is
greater than it's been, and that brings with it cost because for
every pick-up in the intensity of regulation and contact there
is greater effort required within a business for compliance. So
that is certainly an issue. However, I would say that the two
biggest issues that could easily discourage a new entrant are,
one, the lack of switching in current accounts. Now, it's not
just about current accounts because the nature of the current
account in financial services transcends the products itself.
What the current account acts as is a fulcrum for all of the other
products that banks sell. So for example, 88% of savings products
will be sold by the bank that has the current account. So it goes
beyond just current accounts.
Mark Garnier: I do know some of my colleagues
are going to pick up on exactly those points a bit later and I
just really want to—
Benny Higgins:
Okay and, just finally, I think one thing I would like to explore
is the economic model where there is fierce competition from new
business, supported by incumbent banks, by profitability of their
existing business. Therefore, any new entrant has to confront
the challenge that they're entering a market where new business
is fought on slim terms, but actually the profitability of incumbents
is supported by their existing business.
Q403 Mark Garnier:
Just drilling down, as I say, into this regulatory issue and the
process. As I say, those other points you have raised will be
covered so do not feel I am skirting round what are very important
points. But there are a number of people who, anecdotally and
otherwise, have made comments that, for example, if you are about
set up a new bank, you have to put a huge amount of regulatory
capital into that organisation and then have it sitting there
doing absolutely nothing for the next nine months while you go
through the process. I mean for someone like Tesco where you have
a strong balance sheet, that is probably not a problem. But, again,
with your experience having gone through this process, do you
think that is a fair criticism of the regulatory process?
Benny Higgins:
I wouldn't say it's a fair criticism of the process. I think it's
a fair reflection of the need to have large amounts of capital
to be in financial services and that itself will act as a discouragement.
But I don't think that we should consider it a criticism of the
regulatory process.
Q404 Mark Garnier:
You do not see it as a Catch-22 where investors will not invest
into a business where you are not getting return on your equity
for potentially up to a year? You do not see that as a—
Benny Higgins:
I don't think that is a leading issue. I think the leading issue
is the matters I've already listed.
Q405 Mark Garnier:
No, no, that is a fair comment. Just one last question, because
you actually seem to be a relatively happy customer. "Every
little helps", it seems, where the FSA is concerned. Would
you give them a good reference, if you like? If somebody was to
ask you how the FSA has treated you going through this regulatory
process would you say, "Yes, they're fine. There's no problem
with that. They're doing okay"?
Benny Higgins:
We go through an annual appraisal of the FSA to the FSA and it's
not so long ago we did. We have a very good relationship, a very
open and co—operative relationship, with the FSA. There
are times when single issues may seem to be handled in a disproportionate
way, but actually we have a very strong relationship with the
FSA and can't complain about the way in which they have handled
our process of going through change of control. We announced the
acquisition of the other half of the business from RBS in the
summer of 2008 and we completed the process in December 2008,
which required us to go through a change of control process and
we thought it was handled very professionally on both sides.
Q406 Andrea Leadsom:
Mr Higgins, we have had some very interesting complete conflicts
of opinion this morning where we have had both Lloyds HBOS and
RBS claiming that the PCA market is highly competitive, that there
is very little cross-selling, that the cross-penetration is not
high, that there are no barriers to new entrants and, indeed,
that they fall over backwards to accommodate the switching of
personal current accounts. I think you are hinting at the fact
that that is not the case in your opinion. And your view would
be shared by Sir Donald Cruickshank who gave evidence to this
Committee saying that he believes that the barriers are those
of new accounts, new current accounts. And indeed that would appear
to be shared by the OFT, who think that there is not enough competition,
that switching is very low, that there is great customer inertia.
So just by way of the background there, there are these enormous
conflicts that have come out today.
What is your opinion? Sir Donald Cruickshank told
us that the banking industry should be stripped of its control
over the shared network infrastructure. Do you agree with that;
in other words, that they should not any longer be allowed to
own and manage money transmission services on their own to their
own rules?
Benny Higgins:
I don't think that is the issue. I would rather go back to some
of the points you made earlier. Let's address the question: is
the market for current accounts competitive? Well, if we go back
to first principles: what would make a market competitive? A market
would be competitive if there was a sufficient number of suppliers
offering a sufficient range of choice to customers in an environment
where the customers are well informed through transparency and
full availability of information and where there are no perceived
or real barriers to switching. If we address the PCA market against
that level of criteria, I think it becomes very clear that we
don't need to hint at a conclusion. It's an unequivocal conclusion
that the market is not competitive.
We shouldn't look at the market shares. They're actually
not the issue here. What we have to ask ourselves is: what is
it about the customers' behaviour? What is it about the companies
who serve those customers' behaviour that tell us the answer?
And if we look there we find that the FSA did a study only, I
think, last year where 39% of customers said that all banks' products
were pretty much the same: the same price for the same outcome.
Now, that's palpably untrue. It's untrue for individual banks,
never mind across different banks. So there is a lack of transparency.
We already have discussed in brief the amount of income that flows
to the banks in respect of current accounts, but that's not something
that customers are aware of, so there is a distinct lack of transparency
and disclosure of information.
Q407 Andrea Leadsom:
So would you highlight transparency—in other words, the
customer knowing what their current account costs them or, conversely,
what the profitability of their current account is to their bank?
Is that the one key thing that would make the difference?
Benny Higgins:
There are two that will make the key difference. One is full disclosure.
Now, there is an OFT initiative to do so. I just hope that in
three or four years' time progress has been made and it's just
not a bunch of initiatives that never come to fruition. But there
are initiatives that will bring greater transparency to this particular
question.
The other is the question of how easy it is to switch,
perceived and real. Again, we can look at OFT data where a quarter
of customers who switched said they wouldn't do it again. A third
of customers who switched said they wouldn't recommend it to a
friend or member of their family. So unequivocally, I think what
we have here is evidence that there is an absence of proper transparency
and disclosure and there is a perception—and indeed there
is a reality. A quarter of customers who do so also say they encountered
some difficulty during the process. It's not all the bank's fault
because the direct debit originators are involved, but there needs
to be creative energy and momentum to solve the problem. Until
these two factors are resolved, you cannot describe the market
as competitive.
Q408 Andrea Leadsom:
Yes, and I completely agree with you there, and certainly have
had a lot of letters from constituents who have had a complete
nightmare trying to switch accounts from one provider to another.
In particular, what they have highlighted is that it is the argument
between the bank they are leaving and the bank they are going
to as to who should do what that causes the hold up. Certainly,
both of our earlier witnesses were suggesting it takes four to
six weeks to switch accounts, which is an extraordinarily long
time. Sir Donald Cruickshank suggested to us that the key to changing
this was to have a new licensing regime for money transmission
systems—CHAPS and BACS and so on—that would require
that banks allowed complete account portability, rather akin to
what he achieved when he was leading Oftel with telecoms—taking
your phone number with you. What he was suggesting is that you
should able to take your bank account with you.
So, in other words, it would be for the banks to
find a way to enable you to take your bank account number and
your sort code with you so that you did not have to re-establish
your direct debits and your standing orders and so on. Could you
comment on, one, technologically is that possible—obviously
it is not today, but is it possible? Secondly, would that then
solve the problem? I just want to be very clear: this would be
consumer choice, because a number of people have commented, "Well,
that smacks of Big Brother: an account number cradle to grave".
Obviously, it is about consumer choice. You can change your bank
account number if you want to but, equally, you do not have to.
So with that in mind, could you comment on that, please?
Benny Higgins:
Many things are possible at a price. What I would find it very
hard to gauge is just how expensive that particular initiative
would be. My best guess is it would be very expensive and so,
while I think it should be explored because it certainly has the
embryo of a very good idea, it has to be fully costed and understood
what the implications are. But, beyond that, the real question
is: is there a real energy to make switching straightforward,
whether that's a solution or some other one is?
Q409 Andrea Leadsom:
So when you say, "Is there a real energy?" do you mean
your suspicion—I do not want to put words in your mouth
but is your suspicion that the banks will collude to avoid this
happening because it would, at a stroke, remove barriers to entry
for new market participants?
Benny Higgins:
No, I'm just simply saying that this is not a trivial problem
to solve. It will require a great deal of focus and momentum and
I'm saying no more than that.
Q410 Andrea Leadsom:
Okay, but then, if those obstacles were overcome, do you think
that that would create a radical difference in the competitiveness
of the retail banking sector?
Benny Higgins:
If you look at other aspects of financial services where there
is greater transparency, where there is a much easier switching
process, you see much higher activity around switching. The number
that is quoted for current accounts is usually around 7%. In fact,
I saw some data the other day that suggested, if you take out
secondary accounts, the real underlying switching is probably
more like 3%. It's very, very low.
However, if you look at credit cards, for example,
the UK Cards Association has just published some numbers showing
that in the last 12 months no less than 27% of customers have
either taken a new card or a first card and, indeed, 14% of them
closed the card that they had. So in a market where there is an
ease of switching, where there is transparency around what you
get charged and what you get, customers will be more active. Customers
will switch. One of the tests in competition, I would suggest,
would be: is there evidence of customers having a product which,
if they were to look at what they were charged and what they got,
don't move despite the fact that there are alternatives there
that would serve them much better? Against that test, I think
current accounts fail.
Q411 Jesse Norman:
We have heard one very interesting piece of testimony already
that you may have noticed, Mr Higgins, which is that RBS were
apparently not concerned about the anti-competitive effects of
the Lloyds HBOS merger, which suggests either that they regard
Lloyds HBOS as a staggeringly uncompetitive organisation as a
whole, or that they are very self-confident about their own ability
to compete. I want to ask you about two things. The first is:
do you not think it is possible that switching could make banks
more profitable, for two reasons? One is that it siphons away
customers off whom the banks are earning relatively little money,
whereas we know in fact they are earning an enormous amount of
money on the overdraft and charge side. The second is because
it siphons off the grumpiest customers who might be expressing
their voice within the institution for more transparency and lower
charges.
Benny Higgins:
Well, first of all, I think the issue is: should the personal
current account market and, beyond that, the retail banking market
be more competitive and what would be the characteristics of a
competitive market, regardless of the profitability today or tomorrow?
But if I could give you a statistic I think to illustrate—
Q412 Jesse Norman:
Sorry, we can rephrase my question. It is whether or not switching
might in fact make the market less competitive for the reasons
I have described.
Benny Higgins:
A lot more switching is an unlikely characteristic with a market
that's less competitive. The freedom to switch between suppliers
is a necessary component of competitive markets and, as I said
earlier, I think disclosure, full information being available
and there being the minimum number of barriers to switching is
what you need to have a competitive market. But if I could illustrate
a point, in savings, for example—and I quoted a point earlier—88%
of savings are with the current account provider. If we were to
take the £1 trillion that sit on deposit in the UK—now,
there are a range of different products ranging from instant access
through to fixed term deposits—and we were to ask the question,
"How much more would transfer from the banks' profitability
to the households that make those deposits if all of those customers
placed their deposits at the average of the top 10 for that particular
segment?", by my calculation you get to £10 billion
annually, quite easily.
Q413 Jesse Norman:
So that is £10 billion that the customer is paying that they
should not be paying if they were just offered only of the average
of the top 10 products across those market segments?
Benny Higgins:
They're foregoing interest. Now, in any market you don't get perfect
mobility where people make the perfect choice. There are many
reasons for placing money, around trust and so on with different
institutions, but what we're talking here about are very similar
products.
Jesse Norman: Right, so is £10 billion
what you would call a very high level of friction, which suggests
that there are institutional inertial factors that are preventing
the markets from operating?
Mr Higgins: And I would suggest
it's lack of information.
Q414 Jesse Norman:
Okay. That is very interesting. Can we just go into more detail
about what you are proposing to do on areas where you think there
should be more transparency? So take, for example, the personal
current account where we know that free banking, as such, does
not properly exist. Would your view therefore be that the banks
should charge the correct price for that service or that they
should disclose how much in income the person's foregoing by using
it?
Mr Higgins: I would suggest that
if there was proper disclosure of information and there wasn't
a perception that switching was difficult, then actual behaviour
of markets would bring about the right level of pricing and the
accompanying profits.
Q415 Jesse Norman:
But for the avoidance of doubt, there would therefore be a bit
of paper where someone would say, "In opening this account,
you are essentially agreeing to pay us £100 to £150
a year", or whatever the true embedded price is for that
kind of account, "which will be paid in the form of foregone
interest earned". That is the kind of disclosure you have
in mind, is it?
Mr Higgins: Yes. The difficulty
is some of the income that flows from the customer to the bank
is partly dependent on the behaviour in a particular period of
time and so it wouldn't always be this; you know, it wouldn't
be possible to this accurately predict. But I think what is important
is that disclosure of the cost is very clear. Now, as I've said
already, the OFT have initiatives to pursue this. It is, in my
opinion, very important that the execution of it is such that
it resolves the issues as far as possible.
Q416 Chair:
Jesse's question is: how can that be best made transparent? And
we need an answer to that.
Mr Higgins: Well, the answer is
that we need to show, I think, with a sufficient frequency, how
much is being paid by consumers to banks.
Q417 Chair:
So do you mean how much interest foregone?
Mr Higgins: Well, some basis of
interest foregone. I mean, I wouldn't like to over-simplify the
disclosure. What we have at the moment is it's quite difficult
for people to understand the combination of the charges, fees,
interest foregone. I mean, it's best, I think, illustrated by
the concept—we still talk about free banking all the time.
I would go further and say that free banking is a myth. In-credit
free banking is a myth, because as I said earlier that £9
billion that was received by the banks in revenue from customers—it's
the only source—50% of that was around in-credit balances.
Q418 Jesse Norman:
That is very interesting. It was, and we have heard that already.
But just for the avoidance of doubt, the kind of schedule you
have in mind is one which would allow a Which? or someone
similar to rank 50 bank accounts, show what the interest foregone
would be, show what the costs would be and show, as it were, the
additional cost of a marginal mortgage product or some savings
product; it would be that kind of thing. So someone could look
down and go, "Okay, I see. This is really uncompetitive.
I need to be going with Harry" and say where they would,
for example, with an ISA or some of these other—
Mr Higgins: Yes, I mean, in the
first instance, you would know how much you pay today and you
would be able to look at what you would pay if you made an alternative
choice.
Q419 Chair: Why do
you not write down in some detail how you think the industry should
be required to go about this, rather than persisting with questions
now? It is not an easy subject. It is quite complicated, but it
is a very important one.
Mr Higgins: I agree, Chairman.
I wouldn't understate the complexity of it, but there has to be
a considered effort to make sure that the breakdown—
Q420 Jesse
Norman: The key point about this is by all means sketch two
or three different alternatives, but please work them out so we
can actually see what it would look like, because it is only the
working out that one gets a real sense of the complexity of it.
Mr Higgins: No, the expression
of transparency is easier than the execution, but it's important
that we are focused and creative in doing so.
Jesse Norman: That is helpful.
Q421 Mr Mudie: Just
taking your report, can you tell us just—because it touches
on where you do not do current accounts and mortgages—are
you wishing to do?
Mr Higgins: We've already made
public our desire to launch more—
Mr Mudie: Could you speak up a bit, please?
Mr Higgins: Sorry, apologies.
It is. We've expressed our plan that we will launch mortgages
in the middle of next year.
Q422 Mr Mudie:
Which one?
Mr Higgins: Mortgages, mortgages.
Mr Mudie: Mortgages?
Mr Higgins: Yes.
Q423 Mr Mudie:
What about current accounts?
Mr Higgins: We don't have a very
fixed date yet. The reason why we're able to do mortgages first
is because, as we've been migrating our business away from RBS
systems, which was part of the joint venture organisation, it's
the new platform that we will be in a position to launch current
accounts from. In terms of mortgages, it's a separate kind of
platform, because mortgages are run differently. But mortgages
will be first and that will be in the middle of the year.
Q424 Mr Mudie: No,
but just in the context of the discussion here, nothing is preventing
you in principle, apart from your timetable. You are doing the
mortgages first and then you are going to do current accounts.
There is nothing stopping you doing those two things, is there?
Mr Higgins: No. I mean, at the
end of the day it's rarely that something stops you doing it.
I think the conversation that we've had so far would say that
there are issues that make it difficult to go into the current
account market. We're certainly very determined that when we do,
we will do so in a way that is consistent with the Tesco values
and the Tesco business.
Q425 Mr Mudie:
No, I understand that, but we are looking at what is stopping
people like yourself come in quickly and get established and get
running and giving competition. You see, the transparency side,
I go on confused.com and all that if I am looking at insurance
and things like that, and I will have everything listed and they
will compare each of the providers, and I will be able to look
down the list and think, "Well, this is important. This looks
good". Now, why can you not do that on retail banks then
for current accounts?
Mr Higgins: It's just at the moment,
it's more difficult to have a simple comparison that's supported
by the disclosures that banks make around current accounts.
Q426 Mr Mudie: Right,
but you were at RBS, and you were at one other bank in a senior
capacity, HBOS. Now, you were in retail there. Is it impossible
for anyone to do it outside those banks? It is not even a question
of disclosure. They are withholding information that would permit
a comparison; is that what you are saying?
Mr Higgins: No, I'm not. What
I'm saying—and first of all, I'm here exclusively to discuss
Tesco Bank today, that's who I represent, Tesco Bank—I'm
happy to make comments on the industry in general. I've made a
number of comments already which I think are genuine—
Q427 Mr Mudie:
Now, Benny, you have been very good, and you have been the most
important witness we have had. They have all been defensive. You
are actually somebody who has been trying it, gone along the road,
seen the difficulties. Well, let me put it: if I wanted to set
up or Martin Lewis wanted to do something in terms of current
accounts, "Come on my website and I will show you the most
competitive in terms of current accounts", could he do that
with the information that is in the public arena?
Mr Higgins: I think it would be
quite difficult at the moment.
Q428 Mr Mudie:
Not impossible, but quite difficult.
Mr Higgins: Nothing is impossible
if there's enough energy and focus.
Q429 Mr Mudie: Right,
okay. Now, Mark—and I think you have been exceedingly generous
to the FSA—he asked you a question about how you got on
with the FSA and you said you have had some wonderful reviews
from them. Your evidence—
Mr Higgins: No, I'm sorry, I didn't
say that. What I said is we appraise them of how our relationship
is working and it was very—
Q430 Mr Mudie:
Yes, but we are more concerned about how your initial dealings
were with the FSA, and they sound to be as fraught as we fear
they will be, that they would be and are. I mean, I just read
about someone taking up a post in the City who waited two years
to be told he was not fit to take a job with the FSA. We are picking
up long delays and—
Mr Higgins: Well, all I can do,
I'm afraid, is express how we experienced the changes. You have
to remember that the business that was initially Tesco Personal
Finance, now Tesco Bank, was established in 1997, and it did have
its own banking licence as a joint venture with Royal Bank. When
Tesco acquired the other half, what was required was a change
of control through the FSA, and it does require a very detailed
regulatory business plan. We went through that process in the
summer and autumn of 2008 and all I can say is our experience
was very good.
Mr Mudie: Your experience was very good.
Mr Higgins: Yes.
Q431 Mr Mudie: I
am struggling to find it, but you are less happy with them in
your description in your paper on various aspects.
Mr Higgins: Well, let me just
make sure that there is no doubt about this. What I have said
is that intensity of regulation is greater than it was. The FSA
have acknowledged that. I think it's an appropriate response to
the last few years. When one gets a change in intensity, change
inevitably brings some teething issues. Change also means that
there's more activity, so what I would say is that there can be
more clarity, but from our perspective we have a good relationship
and we are systematically working through the things that we need
to do.
One thing I would say is you do need the right
expertise to be working on this. You need the right access to
capital. This is not a straightforward business to enter. I listed
earlier what I thought were the headline potential barriers to
success and, therefore, potentially issues which would discourage
new entrants. None of them are barriers to entry. It's why I would
prefer the expression "barrier to success", because
nobody's getting told they can't enter. It's just that there are
issues that you have to overcome and one of them is the regulatory
burden—I'm not saying it's inappropriate—the regulatory
capital burden, which is becoming bigger. It's important that
regulation is robust and proportionate. I think that is very important.
Q432 Mr Mudie: Did
you read or see our session with Don Cruickshank?
Mr Higgins: I have seen it. I
read it some time ago, but I can't remember it in detail.
Q433 Mr Mudie: His
evidence was astounding in terms of how difficult it is to set
up a bank in the UK now. Did you come across those passages?
Mr Higgins: Yes, I mean, we are
in the process of creating what we hope is a very successful bank
that will serve Tesco customers well. I mean, I should say one
of the things I hoped to be able to cover was that what we aim
to do is to serve Tesco customers well by being a very prudent,
traditional bank, but by applying modern methods. If we can do
that, we will, I think, make a big contribution to the financial
welfare of Tesco customers.
Chair: That is very, very helpful evidence
you have supplied us with, not always in accordance with the evidence
we have heard earlier this morning. That is why we take evidence
from a variety of witnesses. Thank you very much for coming this
morning—we have appreciated it—and for waiting out
until the end.
Mr Higgins: Thank you.
Chair: Thank you.
1 Note by witness: Questions 394 - 396 were
misinterpreted. To clarify Tesco Bank have raised this issue with
the OFT in written evidence submitted in response to the review
of barriers to entry. Back
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