The Split of The UK Banks
by Ritchie Mehta (05 November 2009)
Some say that the day of reckoning has arrived for the stricken UK banks that are in government hands. This week the government announced its plan for the future of RBS, Lloyds and Northern Rock, which has been termed a ‘revolution on the high street’. Alistair Darling has unveiled plans to split the banks up and create three new banks from these current entities. It seems that there is likely to be a move to having a solid banking network with branches across the high street. In addition, it has been suggested that household names such as TSB and Cheltenham and Gloucester will make a come back.
The exchequer has made assurances that these plans would not end up in a ‘firesale’ of the taxpayers banking assets and insisted that ‘only when the time is right and the price is right’ would they consider a sale of a government owned banking entity.
Interestingly, Darling suggested that Northern Rock will be split by the end of this year but no hasty decisions will be made regarding a sale of the bank. The plan unveiled has an underlying objective of increasing competition across the UK banking marketplace and reduce the power of the few banking giants that are currently standing today. This will certainly be good for consumers as it will heighten choice and hopefully drive prices southward.
However, this is not something that is going to happen tomorrow. It is likely to take a number of years before we can start to see the new structure of the banking system in the UK. For all those who are still worried about their deposits and savings in the banks while this process takes shape, let us remind you of the financial services compensation scheme. The scheme covers 100% of your up to the value of £50,000 if the institution holding your savings goes under. So, as long as you have savings under this threshold with a UK bank you should be covered.