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Mark Hoban is Financial Secretary to the Treasury and MP for Farehham

Screen shot 2012-07-19 at 15.57.40Today’s announcement that Lloyds will sell over 600 branches to the Co-op is very welcome news. It will deliver a stronger, more competitive banking market – and it will be consumers and businesses that benefit.

This deal makes the Co-op a stronger competitor: it will gain 4.8 million customers, including 100,000 business accounts, it will have 6% of the market in personal current accounts and about 10% of the UK bank branch network. It is a significant step towards restoring proper competition to the banking sector.

I’ve worked with the FSA, the European Commission, the Co-op and Lloyds to facilitate this deal and it is one of a series of actions we have taken to open up a banking market that became less and less competitive whilst Labour were in office.

In 1997, there were ten major UK banks. After over a decade of consolidation, culminating in the Lloyds-HBOS deal, this left the high street with just five major players. That dominance currently means that the largest four banks in the UK account for 77 per cent of personal current accounts and 85 per cent of small and medium-sized business current accounts. That concentration is bad for retail customers and businesses. It meant there was less competition and less innovation.


We came into office committed to increase competition and diversity in the financial sector. Customers too have made it clear they want and need more choice. In the last week alone, Nationwide has seen a 67 per cent  increase in the number of people applying to switch their main current account to them, while Metro Bank, a new bank, has seen an increase of 10 per cent.

We have made good progress in strengthening competition on the high street. Last year, we announced the sale of Northern Rock to Virgin Money. We have also seen a run of new entrants and promising expansions: M&S have announced they are going to set up 50 bank branches in their stores, creating 500 new jobs; Metro bank has announced expansion from central London into the home counties; Asda has rebranded its personal finance division as Asda Money and is introducing a credit card with a cash-back scheme.

We are complementing these changes in the market by making it easier for mutuals and new banks to compete with the existing high street banks. We are giving building societies new freedoms to compete with banks, whilst maintaining the distinctive ethos that comes from their mutuality. We are strengthening credit unions to enable them to become a real force for change. Today, we have published a consultation on reforming the payments system so we don’t have a repeat of the banks’ botched attempt to scrap cheques, whilst making it easier for new entrants to compete with existing banks on customer service.  We are making it easier for consumers to switch bank accounts. The Bank of England and the FSA are reviewing their processes for granting new banking licences.

This ambitious package of reforms complements the radical reforms we are making to financial regulation. We are scrapping Labour’s failed and discredited tripartite regime. Our new Financial Conduct Authority will have competition as one of its key objectives and we are giving new powers to intervene early to protect customers.  We are transferring the regulation of the safety and soundness of banks and insurers to the Bank of England.

Regulatory reforms and ensuring a competitive banking sector are key parts of our programme. They will benefit consumers through increased protection and real competition on the high street. More banks mean better products for consumers and more innovation.  But with new entrants onto the high street, the sale of Northern Rock, and today’s confirmation of the Lloyds deal, consumers and businesses up and down the country are beginning to reap the benefit of the competitive banking system this Government wants to see.

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