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Cruickshank report lashes UK banks

LONDON: Donald Cruickshank, government-appointed banking expert, launched a stinging attack on British banks on Monday, saying UK customers and small businesses were getting a raw deal and urged tougher regulation of the industry.

Cruickshank, publishing his long-awaited review of UK banks' competitiveness, said personal and small business customers were paying up to three billion to five billion pounds ($4.7 to 7.9 billion) a year too much for their banking services. This amounted to between 40 pounds and 400 pounds for most households in the country.

"I am saying to the Government that there are real problems with the way banks control the networks which allow money to flow around the economy," he said. "New banks and new technology are not solutions. So, Government, step in!"

The regulator, who began his investigation some 16 months ago, called for tougher regulation, including moves to prevent anti-competitive mergers in the banking industry.

He called for a new payments regulator to supervise a licensing regime for banks' cash and payments networks. He also asked for a monopoly investigation into banking services to small businesses. Bank shares have slumped in relative terms over the last six months on investors' fears that government regulation and a flood of new Internet competitors could cut into their high profits.

Chancellor of the Exchequer Gordon Brown launched the probe 16 months ago in the face of criticism that British banks are anti-competitive, impose high charges on customers and provide poor service.

Cruickshank has no statutory powers but the government could act on his recommendations under new competition legislation that can impose fines up to 10 percent of companies' turnover.

The government has already rapped the 34 member banks of the Link cash machine network over plans to charge for cash machine withdrawals.-Reuters