Banking crisis leads to an overhaul of the banking system
Article source: Julia Finch - www.guardian.co.uk
The British Banking system is set to undergo a complete make over in the wake of the banking crisis. Nothing will be left unturned; there will be fewer banks, few high street branches and thousands fewer employed in the financial system. All of this will lead to more expensive current accounts and a limited choice in terms of the available financial products.
The focus now within the high street banks will shift from the number of new products a bank teller is able to close by the end of the day to the counting of cash, collection of arrears and the reduction of operating costs. This means that competition in the banking sector is as good as dead because it is now all about being risk averse for the remaining banks that have rallied through the crisis.
The rate of take over is alarming with four big banks now remaining from the five big banks that once dominated the British Banking system. Bradford and Bingley’s savings and deposits business has been taken over by the Abbey and the Lloyds TSB is about to finalise a takeover of the Halifax Bank of Scotland (HBOS). There is still no telling how many of the banks will be left standing at the end of the day because all the takeover activity is catching everyone by surprise.
Customers will definitely have to dig deeper into their pockets to be able to purchase financial products. One likely new entrant in to the current account and mortgage market business is the retailing giant Tesco. The retailer has expressed interest in the sector citing customers’ trust in its operations even more than some of the brand names that have been in the banking system for many years as one of the major reasons.
But even with the reduction of the number of banks in the system, customers should not expect a personalised service because it is too expensive for the system; they should therefore get used to the idea of call centers, as they are here to stay.
The biggest blow in all these changes has undoubtedly been to the mortgage market. Mortgage borrowers are now finding that they have to face stricter lending criteria as set by the mortgage lenders; stricter criteria has been introduced in a bid to be more risk averse with deals going to those home owners who have some amount of equity in their homes.
The self-employed mortgage seekers are in for big set backs to their house buying plans. Recent changes are seeing limited availability of the previously popular self-certified mortgages; these products only required proof of income as opposed to an endorsement by ones employer. At the same time banks are getting selective as to who gets a personal loan or a credit card. This move however, will be apt in streamlining the market and getting rid of the many confusing previously available offers.
Another major outcome from the banking crisis is that the Government will be actively involved in coming up with new policies to govern the banking system. There may not be any government aided recapitalisation but its involvement will be key to ensuring that the banking system is on track. Already, the Financial Services Authority has expressed the need to have the capacity to send its own assessors to evaluate the banks’ payment and bonus structures as well as decide whether the banks are involved in too many risky operations.
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