Socialist Miliband wants banks to sell off significant numbers of branches
Banks must sell ‘significant’ number of branches, says Ed Miliband
Ed Miliband will outline plans to force major lenders, such as Lloyds, to sell off a ‘significant’ number of branches
Labour Leader Ed Miliband Gives His Keynote Speech At the Annual Party Conference
Harry Wilson By Harry Wilson, Banking Editor10:00PM GMT 16 Jan 2014CommentsComments
Ed Miliband will today promise to create at least two new challenger lenders by forcing Britain’s biggest high street banks to sell a “significant” number of branches.
The Labour leader claims that, if elected, one of his first acts would be to order the Competition and Markets Authority (CMA) to produce a report on how to cap the market share of the big banks and encourage new competitors.
The new challengers would be formed by forcing the country’s largest lenders to offload hundreds of branches and would be up and running before the end of the next parliament in 2020.
Mr Miliband’s keynote speech at the University of London has been widely leaked in advance, but details released on Thursday made clear the scale and speed of his proposed reforms.
The CMA would be expected to complete its report within six months of the election and further investigations by the authorities would be triggered if any bank breached the new market share cap.
Mr Miliband will say: “We are not asking whether existing banks might have to divest themselves of a significant number of branches. We are asking how to make that happen.”
Lloyds Banking Group would be the main target of any move to force lenders to sell off large parts of their branch networks. The prospect of a major sale of more of the bank’s branches, in addition to the current divestment of the 631-branch TSB, could thwart the coalition government’s plans to sell more of the state’s 33pc holding in the lender.
Lloyds controls about 23pc of UK retail deposits and if a US-style cap were introduced would have to more than halve the size of its business by the end of the next parliament.
However, senior banking industry sources said the Labour leader’s plans could prove impossible to implement within his timeframe and would be vulnerable to a legal challenge.
“Our understanding is the CMA, under its own guidelines, is required to take at least 18 to 24 months for any market study, therefore the idea that the work could be done in six months looks impossible,” said one source.
He added: “Shareholders could, and would, challenge any judgement that impacts on the value of their holdings. And this is before you look at potential breaches of European Union law on the free movement of goods and capital.”
Business Secretary Vince Cable said yesterday that splitting up banks was not the way to encourage more competition and could prove costly.
“If you get a new bank, you’ve got to set up a technology platform, these things are not straightforward, it involves disengaging the IT system, and this can’t be done through an administrative reboot,” he said.
The inspiration for Mr Miliband’s plan to cap market shares comes from the US, with banks limited to holding no more than 10pc of retail deposits, but is opposed by Bank of England Governor Mark Carney.