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4 August 2000
BANKING COMPETITION TO DELIVER BENEFITS TO CONSUMERS: GOVERNMENT RESPONDS TO CRUICKSHANK REPORT
Related HMT Press Notices
Internal links
- 25/01/99 15/99 Consultation on Independent Review of Banking Services
- 09/11/99 187/99 Competition and Regulation in Financial Services Markets
- 21/03/00 HMT1 Budget 2000 Prudent for a Purpose
In accepting Don Cruickshank's report Chancellor Gordon Brown announced a package of new measures to improve competition in the UK banking market and deliver benefits to consumers.
Announcing the Government's detailed response to Don Cruickshank's wide-ranging report on improving competition in UK banking markets, Gordon Brown said:
"Don Cruickshank's report is a major milestone in improving competition and ensuring that consumer benefits are central to banking services. In accepting the report's recommendations, we are determined to drive competition forward and deliver real improvements for personal and small business customers.
"Too often banks and other financial services providers have been slow to give consumers the information they need to make informed choices and make the most of developing competition, new technologies and new products.
"Banking services, like every other sector of the economy, need to be exposed to the full rigours of competition. We aim to achieve this through reforming regulation, opening up payment networks and eliminating any special treatment."
The Chancellor and Don Cruickshank have discussed the Government response in some detail. Don Cruickshank welcomes the Government's plans for action across a wide range of the recommendations.
Measures announced today include:
- CAT standards for credit cards together with emphasis on disclosure of key terms and conditions
- Consultation on extending CAT standards to other financial services products
- review of self-regulatory mechanisms such as the Banking Code to ensure they deliver sufficient consumer benefits
- encouraging comparative tables of banking products and complaints against financial services firms.
The Government Response to the Cruickshank Report also includes announcements on progress in a number of key areas to meet the aim of improving competition in banking services.
Payments
- work is continuing to introduce a payments regulator through primary legislation to open up networks and oversee access charges for bank customers.
- consultation on detailed proposals to establish a licensing system for payment systems.
- a payments strategy for all Government Departments to ensure a coordinated approach in modernising government and responding to developments in and the introduction of e-commerce.
The Response also summarises significant progress in reforming charges and access to the cash machine network (LINK), including opening up the ATM network to non-bank providers, banning double charging for ATM withdrawals, and reform of wholesale charging structures. It outlines further work in progress, including OFT review of the LINK and MasterCard schemes.
Regulation
- a wide-ranging review of the Financial Services and Markets Act two years after implementation to monitor its impact on competition in financial services.
- the review will also monitor the effects of regulation and policies introduced by the Government.
- steps to improve transparency and disclosure in the supervision of financial institutions.
- ensuring that the Government is not seen as giving special treatment to financial institutions in the development of Government initiatives.
- ensuring that Government, consumers and financial services providers are in the best position to take advantage of the opportunities presented by e-commerce.
- review of money laundering regulations to ensure that these are proportionate and minimise distortions to competition.
The Treasury has already acted by announcing an amended objective to ensure that competition issues will be central in its dealing with financial services. This is set out in the White Paper Public Service Agreements 2001 - 2004 published on 28 July.
Small and medium sized businesses
- ensuring that small businesses' access to the financial services ombudsman is not restricted by the number of staff employed but determined by turnover.
- review of the proposed Banking Code for small businesses to ensure that it delivers sufficiently strong benefits to customers.
- encouraging the FSA to ensure that small businesses benefit from its work on comparative information and complaint handling.
- developing government information services to aid new entrants bringing competition to the small business market.
The Chancellor and Trade Secretary Stephen Byers announced referral of the supply of banking services to small businesses to the Competition Commission immediately on publication of the Cruickshank Report on 20 March. This work is already under way and the Competition Commission has been asked to report by June next year.
Thanking Don Cruickshank for his report, the Chancellor said:
"I very much welcome the hard work Don and his team put into the report. There is no doubt of the interest it has generated both here and abroad.
"The report lays firm foundations for the Government and the financial services industry to build on to develop one of the most competitive, dynamic and efficient financial services markets in the world."
NOTES TO EDITORS
1. The Chancellor announced the setting up of the banking review in the Pre-Budget report of 3 November 1998 (PBR press release HMT3). Its terms of reference were to :
- examine the banking sector in the UK, excluding investment banking;
- examine the levels of innovation, competition and efficiency in various sub-markets, including SMEs;
- look at how these levels compare with international standards;
- consider whether there are options for change which the industry or Government should consider.
2. A consultation document was published on 25 Jan 1999 (HM Treasury press release 15/99).
3. Don Cruickshank published an interim report 'Competition and Regulation in Financial Services: Striking the Right Balance' on 22 July 1999.
4. Amendments to the Financial Services and Markets Bill then before Parliament to take account of the recommendations in the interim report were announced and welcomed by Don Cruickshank on 9 November 1999 (HM Treasury press release 187/99).
5. Don Cruickshank's report 'Competition in UK Banking: A Report to the Chancellor of the Exchequer' was published on 20 March 2000. It is available on the Banking Review website at the link below, together with press releases issued by the Banking Review team.
6. The Government's initial response to the report was announced in the Chancellor's Budget Statement and set out in the Budget "Red Book" (HC paper 346) on 21 March 2000 (Budget press release HMT1).
7. The Public Service Agreements 2001 - 2004 White Paper published on 28 July included an amended Treasury objective for financial services of:
"Securing an innovative, fair dealing, competitive and efficient market in financial services, while striking the right balance with regulation in the public interest."
8. The issues of financial exclusion and basic bank accounts were addressed in a recent report by the Performance and Innovation Unit: Counter Revolution - Modernising the Post Office Network published on 28 June 2000. The report set out the need for the Post Office to develop urgently its concept of a Universal Bank as a way of addressing Government financial exclusion objectives.
9. Media enquiries should be addressed to the Treasury press office on 020 7270 5238.
10. The Financial Services Authority (FSA) has also published its response to the report today. This is available on its website - link below.
11. Media enquiries should be addressed to Kate Burns at the FSA press office on 020 7676 3232.
External links
The following report is available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website.
For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.