Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 420 - 439)



  420. So there is absolutely no use of profiling techniques to deter people from coming to your bank?
  (Mr Goodwin) Not that I am aware of.

  421. Mr Crosby, there is an allegation by the Consumers' Association, for example, that profiling techniques are used by banks to identify profitable customers and the ones that they do not want.
  (Mr Crosby) I think profiling is used to target the right customers with the right products at the end of the day. Certainly it is not part of our ethic or culture to turn customers away. That is one of the reasons why we have 2 million basic banking accounts, and we see the potential in developing our relationship with almost any customer who wants to have a relationship with us. It is a long-term investment.

  422. Can I pursue the other access to services point about availability of branches? Clearly, it was Barclays Bank in the firing line last year. Is it not right that in the decade before that, 1989-99, NatWest were the leaders in closing branches?
  (Mr Goodwin) I believe that is right. That was before our stewardship of NatWest, and I have heard that figure quoted. My understanding was that it was a previous coming together with NatWest which did not flow through into branch closures until the last decade. From our perspective, one of the key components of our bid for NatWest and one of the key components of our strategy since has been to abolish the branch closure programme which NatWest put in place. As part of their defence, they announced that 200 branches were to close. They put that in train before we took over in March, but we have managed to "unclose" 140 of them. Sixty-odd were just too far down the track to closure. We have made a public commitment to abolish that branch closure programme. We have no plans to close branches. In NatWest we actually think the branch network is quite important, not just to the customers who actually use those branches, but there is a growing body of evidence that suggests that even customers who do not use the branches view the branch network as a component of what gives them loyalty towards the organisation. We think it is important. There will be changes to the branch network in the sense of what takes place in a branch and how a branch looks, but the notion of a wholesale branch closure programme is not one that is in our plans.

  423. The TV advertising campaign that we have all watched: your commitment to make no more branch closures?
  (Mr Goodwin) Yes.

  424. Some people watch those adverts with a wry smile and say it is because you have closed all the branches first.
  (Mr Goodwin) I can imagine people would do that, but from our perspective, the minute we obtained control, we actively reversed branch closures. I guess we have to start from where we start. Maybe we would not have been able to make that promise if NatWest had still had another 1,500 or so branches on top of the number it had. I am not here to argue the case for something that NatWest did when we had no responsibility for it and no knowledge of their rationale. I struggle to understand why branch closures always seem to come along in hundreds. It seems to me that there may be reasons why an individual branch may have to close, like somebody wants to build a motorway through it, but I do not really see that I can sit here and justify every branch closure NatWest made in the past. I suspect I would have difficulty with some of them.

  425. In the USA banks are made to report to a government office about their lending policies, their access to service policies, and the people they will take on as customers, and in that way get a credit rating. It is called the Community Reinvestment Act. Do you agree that something like that is missing in this country, Mr Head?
  (Mr Head) One of the reasons I joined the Co-Operative Bank is that they do something similar through the partnership report, which is actually looking at all the different stakeholders in the business. So I support that sort of thing and I would like to see more of it. In answer to your question, yes, we probably do need to see more.
  (Mr Goodwin) We own a bank in the United States and we are very familiar with the operation of the CRA. I do not know that it would produce a dramatically different outcome, but there may be more transparency about all that the bank does and provides. But as always with these things, the devil is in the detail. There are critics of the CRA and there are some aspects of it which work better than others, but I do not have a conceptual objection.

  426. So you are comfortable with the concept?
  (Mr Goodwin) If properly applied. I do not think it would make a huge difference to what actually transpires on the ground in the UK.

  427. Your bank has not actively lobbied the government not to introduce such a thing in this country?
  (Mr Goodwin) No.
  (Mr Crosby) I am not sure that it would make a material difference to what we do in our day-to-day business activity, but if it helps overall perception of the industry, it would be a good thing. I am not sure that necessarily the detail of what happens in the American banking system particularly translates well in the UK. It is an amazingly different banking market, but the principle is not something that we would have any problem with.

Mr Davey

  428. Am I right in believing that the Halifax and NatWest/Royal Bank of Scotland preferred the government's proposals on money transmission systems to Cruickshank's?
  (Mr Crosby) In terms of the regulation of the money transmission system?

  429. Indeed.
  (Mr Crosby) At the time of the Cruickshank Report we supported the suggestions around PayCom.

  430. You prefer PayCom?
  (Mr Crosby) We did at that time, but we are satisfied. We are not necessarily sure that OFT oversight will in the end be materially different, but when PayCom was in the air, we were active in our support of it.

  431. Mr Goodwin, do you have a preference?
  (Mr Goodwin) I do have a preference. We did not publicly take a position on it, but we are quite content with what is proposed by the government, putting it into the OFT.

  432. Do you have concerns about PayCom?
  (Mr Goodwin) I think we would always have concerns about a new regulator coming along. We were not entirely clear what the problem was. I think putting it back into the OFT will bring about the desired outcome in terms of seeing that competition can take place and to establish that competition is there.

  433. Did you or members of your staff lobby the Treasury to not go down the PayCom route?
  (Mr Goodwin) Not to my knowledge. I certainly did not. We did not as a policy matter. We employ 95,000 people, so I do not know whether any of them spoke to the Treasury or not, but not as part of the Royal Bank official policy on the subject.

  434. You would have been relaxed if the Government had opted for PayCom?
  (Mr Goodwin) It would have been our preference for the Government to do what they have done.

  435. Why do you prefer that to PayCom?
  (Mr Goodwin) I think the issue is around competition. I think setting up a regulator would have taken us down a different path in an industry which is already heavily regulated as to the detailed operation of the system. That was our preference.

  436. Was not the main finding of Cruickshank that it was in the money transmission services where the greatest degree of monopoly was within banking, and therefore that was where regulation to promote competition was needed?
  (Mr Goodwin) I do not agree with all of Cruickshank's findings and I do not agree with that finding. The question you asked was what our preference was as between PayCom and the OFT, and our preference was for the OFT, but we did not lobby the Government for that outcome. It is not something that we played any part in bringing about.

Mr Cousins

  437. Looking at the Banking Code, in paragraph 3.2 it says, "When you open an account we will tell you how the clearing cycle works, including when you can withdraw money after paying cash or cheques into your account." I wonder if the three of you could just tell me how it does work in the case of your current accounts and what that time is.
  (Mr Goodwin) The clearing cycle operates on a basis which does not discriminate against any individual account types. It is more sensitive to whether it is a cheque that is paid in or cash, or whether it is a Royal Bank cheque on the Royal Bank or a Royal Bank cheque on Halifax or someone else. Those things influence the clearing cycle more than whether it is a type A current account or type B current account. We would be here all day if I tried to go into the mechanics of the clearing cycle, but the time period depends on who the cheque is drawn on, whether you are paying from Royal Bank to Royal Bank or Royal Bank to Halifax, or whether it is a Halifax cheque being paid into a Royal Bank branch to go to a Royal Bank account. Those can all affect the clearing cycle. Some financial institutions operate different clearing cycles. Our clearing cycle would generally be three days across NatWest and RBoS, all things being equal, but there are scenarios in which it would be longer, depending, as I say, who the cheque was drawn on. There are a wide range of permutations of length of time it could take depending on who the cheque was drawn on, and what account it was going to be paid into. The important point about clearing is this. There is a common perception that somehow the bank wins because of the length of the clearing cycle. There is no float from our perspective, so if you are paying money into your account, when the money goes into your account, it comes out of the other person's account on the same day. The length of time the clearing takes is influenced by a number of factors related principally to moving bits of paper around the country and the speed at which some other people's systems operate. But the bank does not make money out of the float. I do not know if that was behind your question. That is a widely held view, which is not actually correct.

  438. May I just remind you that I am reading from the Code here, that you are signed up to. The Code makes it clear that you should be telling customers when they open an account how this cycle works and when they can withdraw money. I am asking you what do you tell people.
  (Mr Goodwin) I was in the process of describing it without going into all of the detail. There are quite a number of permutations. The general rule is three days between putting money in and taking it out. There are circumstances under which it can take longer, there are circumstances under which the customer can cause it to take less time, but three days would be the working hypothesis.
  (Mr Head) Three days.
  (Mr Crosby) I believe that is what we say.

  439. What do you say? Not what you believe you say; what do you say?
  (Mr Crosby) I believe it is.

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