Lloyds should offload more branches

The head of the Independent Commission on Banking, Sir John Vickers, has stuck to his view that Lloyds should be forced to sell more bank branches to improve competition.

Lloyds has been told to divest itself of 600 branches. Sir John, whose Commission has been told to come up with proposals to make the UK's banks safe in future and beef up competition, has already said that won't be enough.

Today he reiterated to MPs on the Treasury select committee that he was "clear that there should be a substantial enhancement" of the 600 figure, though it would be "inappropriate" come up with an exact number.

Selling 600 branches would reduce Lloyds Banking Group's share of personal accounts from 30% to 25%. But Sir John said it was a major issue that one institution could have a quarter of all accounts.

What Vickers will look like in 2043

Imagine it's 2043 and we face the second major banking crisis of the 21st Century.

Oil, petrol and diesel have been unaffordable for years.

But the real trigger for trouble has been soaring prices for UREs, short for Units of Renewable Energy.

It turns out that Planet Earth has a limited supply of renewables. There are so many wind turbines, the wind has slowed down.

Anyway, whatever the reason, bankers are staring into the abyss once again.

Barclays Moshi Monsters plc is teetering and the biggest, Glaxo Zopa, is about to implode.

Luckily, of course, back in 2011 the retail operations of all major banks were ring-fenced so that only those bits would have to be protected by the taxpayers of the future.

The rest of BMM and GZ can be left to rot.

Really? Is that what the the government of 2043 is likely to do? Let its banks founder on the rocks.

I think they might rescue the banks, retail, wholesale, investment, cross-border and all -- to avoid an economic meltdown.

Regardless of what Sir John Vickers said all those years ago.

The banks' vice-like grip on our money

Our five top banks control 85% of all current accounts - that's Lloyds, RBS, HSBC, Barclays and Santander.

They use that to sell us other things: 88% of current account customers have savings accounts with the same bank, 53% have credit cards with the same bank and 42% have their bank's Cash ISA.

Banks earn £8.3bn in revenue from our current accounts, or £152 per account. Half of the income comes from pocketing the interest they make on our cash.

Most of us have a suspicion that we ought to switch to a better current account. Banks say only 7% of us bother to switch each year. Others put the figure as low as 3%.

Compare that to the 26% who switch energy provider or phone company.

In spite of the hold these banks have on us, we're frightened of taking our business elsewhere.

But maybe, on Monday, things could start to change.

Sir John Vickers' Independent Commission on Banking is due to recommend ways of loosening the banks' grip on our money - by beefing up competition.

We'll see.

What will we get out of banking reform?

Sir John Vickers laid out his stall today. He has been given the task of recommending how to reform the banking system, after its "rickety structure", as he called it, was revealed during the financial crisis.

But how well will customers do out of this?

Britain's savers are helping to rescue our banks, albeit unwillingly. By putting up with paltry interest rates, they are sacrificing a decent income from their savings in order to allow the banks to sit on more cash and rebuild their balance sheets.

And Britain's current account users are unwittingly subsidising the banking system as well. The lack of competition between our few major High Street banks means that bankers can get away with high charges for overdrafts and other services.

These considerations have been set aside for the moment. Priority is being given to making sure "the system is properly resilient in the future", as Sir John Vickers explained today.

Plainly it is in the interest of customers to make sure that we don't have another banking crisis. However, Sir John's Independent Commission on Banking has also been charged with finding ways to increase competition.

He said today that he was "squarely focused" on that objective. But his focus in this speech was on shoring up the banks and protecting their retail operations in future.

By the time he comes to look at the service and returns we are all getting on our individual accounts, can we expect that much will be done? We have to hope that these niggling points aren't relegated to the afterthought section of his recommendations.

After all, the survival of our banks is a question of life and death, while competition is merely a question of their profits or ours.