In a letter sent to the Chancellor of the Exchequer, Rt Hon George Osborne MP today, the Economy, Energy and Tourism Committee expressed serious concerns about the lack of specific proposals to tackle the lack of competition and diversity with the Scottish financial sector in the Independent Commission on Banking’s final report, which was published last month.
The letter sent to the Chancellor was the result of a short inquiry undertaken by the Committee into how the recommendations within the Independent Commission on Banking’s (ICB) final report would impact on Scotland.
Deputy Committee Convener John Wilson MSP said: "While we welcomed much of the ICB report as the minimum that needs to be done to reform the UK’s banking sector, it was a missed opportunity for Scotland. We believe that given the critical importance of the banking and financial services industry to Scotland and its wider economy, the Chancellor must give the issues we raise in our letter serious consideration prior to the UK Government’s formal response to the ICB’s report.
“The reforms to introduce ring-fencing, increase equity ratios and make switching of accounts easier are to be supported. But we are disappointed that it does not address the need for more competition in Scotland nor tackle some of the deep-rooted ethical and cultural problems that remain in this industry. We also believe that leaving full implementation of the reforms to 2019 is far too long."
The Committee highlighted the following issues in its letter:
- A strong recommendation that there should be no attempt by the UK Government or the banking industry to ‘cherry-pick’ the ICB findings, especially if the UK economy begins to achieve the levels of sustainable growth that we all want to see.
- Concern that that there were no proposals or substantive recommendations in the ICB’s report directly aimed at increasing the diversity of competition within the banking sector in Scotland. Also, bitter disappointment that there has still been no formal investigation into competition in banking in Scotland in personal current accounts, home loans and business banking.
- A call to bring forward full portability of bank accounts as soon as possible and preferably before 2013.
- Call on the UK Government to be aware of the continued strength of public feeling and adhere to the spirit as well as the letter of the ICB’s recommendations by implementing as much as possible as quickly as possible, for example, by considering the use of enabling legislation in the early part of this UK Parliament so that some of the preparation work can begin within banks.
- Substantial work is still required by regulators and competition authorities to tackle barriers of entry and growth for alternatives like small banks, co-operatives, mutuals and a Post Office Bank.