Dominic Lipinski - PA Wire
Lloyds Banking Group and Royal Bank of Scotland today announced plans to sell a number of businesses to appease European Commission concerns about competition.
Q: What is being sold?
A: RBS is selling 318 branches, made up of the former Williams & Glyn's branches in England and Wales and its NatWest branches in Scotland, as well as its insurance business, which includes brands such as Churchill, Direct Line, Privilege, and Green Flag.
The group is also selling its global merchant services business, which handles credit and debit card transactions, and its majority stake in the Sempra commodity trading business.
Lloyds is selling its Lloyds TSB branches in Scotland and a number of branches in England and Wales, online bank Intelligent Finance and its Cheltenham & Gloucester mortgage arm.
MSN Money's full coverage of the banking breakup and what it means
Q: What does this mean for customers?
A: Both groups have stressed that customers will see no immediate changes. The sell-off will take place over the next three to four years and customers will be kept informed about the changes.
However, existing customers of the brands and branches that are being sold will be transferred to the new owner.
Q: What impact will customers see in the short term?
A: Customers should not see any changes in the short term. Both groups have stressed that it is business as usual and they remain committed to offering high service standards and competitive products. They have no plans to run down the businesses being sold.
Q: I have a mortgage with one of the brands that is being sold, how will I be affected?
A: The move will have no impact on your current mortgage deal, such as a fixed rate mortgage or lifetime tracker, as the new owner will not be allowed to change the terms and conditions of these. It is also worth remembering that the sale is three to four years away and many mortgage terms are shorter than this anyway.
Where customers are likely to see a difference is when they come to the end of their existing deal.
C&G currently gives customers the option to switch to another one of its mortgages when their current one comes to an end. The new owner may not do this or they may have a more restricted choice of deals. However, there is nothing to stop customers getting a mortgage from another provider if they are not happy with the range the new owner is offering.
C&G also currently has one of the lowest standard variable rates - the rate customers revert to at the end of a deal - on offer of 2.5% or 2% above the base rate. It is possible the new owner may raise this from its current very low level if the terms of people's mortgages allow this.
Q: I have my current account with one of the branches that is ear-marked for sale, how will I be affected?
A: If one of the branches being sold is your home branch your current account will be transferred to the new owner. They will be able to change the terms and conditions of the account as long as they give you sufficient notice.
The Government has said it wants the businesses to be sold to small or new players in the banking market, and this means you are likely to have access to a reduced branch network.
On the plus side, however, any new player is likely to come in with competitive products in a bid to win market share.
Q: I'm not happy about the prospect of being transferred to a new bank, what can I do?
A: If you bank with one of the branches being sold and you want to stay with your existing current account provider you could transfer your account to another of the group's branches that is not being sold.
Alternatively, once the transfer has taken place there is nothing to stop you switching your account back to your former bank or to another one if you are not happy with the service you receive from the new one. But it is worth remembering that these changes are still three to four years off.
Q: Will these changes increase competition on the high street?
A: It is hard to know exactly what impact the move will have on competition until it is known who is buying the businesses and what their business plan is, but it is likely to increase competition.
Commentators have previously expressed concern that the wave of consolidation seen since the credit crunch struck was stifling competition in the market. It is thought that any new players will want to grow their market share, and they are likely to do this through offering competitively-priced products. They may also compete in other areas, such as through product innovation or service levels, for example having longer branch opening hours.
Q: Will the moves outlined today reduce the amount of mortgage lending Lloyds and RBS do?
A: No, the Government has said that in return for the taxpayer support both banks have received their existing commitment to increase lending to businesses and homeowners by a total of £39 billion for both banks will remain in place.
The sale price of C&G and Intelligent Finance will also depend on the number of customers the businesses have on their books, so it is within Lloyds' interests to keep lending through these channels.
