Well firstly, by way of introduction I am Andrea Leadsom, the new Economic Secretary to the Treasury.
And – somewhat confusingly – while I’ve taken on the title of Economic Secretary left by Nicky Morgan, who became Financial Secretary. I’ve actually taken on the brief left by Sajid Javid – the former Financial Secretary – when he moved into the Cabinet.
So I’m now the Minister responsible for issues relating to banking and the financial services.
And I approach both this portfolio – and this issue before us today – as someone with a very keen interest.
I’ve spent the last four years on the Treasury Select Committee – following the government’s work closely.
And before that, I spent the previous twenty five years – prior to becoming an MP – working in the financial sector.
And if I bring one big passion to this role, if I have one big goal in this role, it’s making sure that our financial system – and our banking system – works in the best possible way for its consumers.
And I think this survey – which was first commissioned by the Chancellor – can play a key role in making that system work for SMEs.
Before I go into detail about the survey though, I’d like to spend a little time first – reflecting on exactly why increasing competition is so important, and secondly – providing some context, by explaining how this survey fits into wider government action on the issue.
Competition in Financial Services
One of my favourite statistics – and it’s a statistic I’ve been quoting long before I got this job – is that people in the UK are more likely to get a divorce than they are to change bank.
But the fact that we’re more wedded to our banks than we are to the people we’re wedded to isn’t because we’re all incredibly happy in our banking relationships.
It’s because of a fundamental lack of competition in the banking system.
And that lack of competition isn’t limited to individual current accounts, or savings accounts.
At present, the largest four banks account for over 80% of UK SMEs’ main banking relationships.
And we believe that such high concentration levels are bad for consumers and bad for businesses.
So we are absolutely committed to fostering a stronger, more diverse and more competitive banking sector, because greater competition will mean better outcomes for consumers:
- it will mean more inventive products, tailored to specific customer needs
- it will mean more competitive products, on interest or charges
- and it will mean more innovative, convenient forms of customer interaction, in areas such as mobile payments and cheque imaging
Our action to improve competition
So what are we doing about it? We’re taking action in a number of areas to make the sector more competitive:
- 22 months ago, the Chancellor asked the FSA to conduct a review of barriers to entry and expansion in the banking sector, which resulted in major changes to the capital requirements for new banks, making it easier for them to enter the market and compete
- we introduced legislation in the Banking Reform Bill to create a new payment systems regulator, which will ensure that smaller banks and non-bank providers can get fair access to payments systems, driving innovation and choice for consumers
- and the 7 day switching service is making it much easier for consumers to move their bank accounts, and helping to put an end to banks assuming their account holders will stay with them because it’s too complicated to change
On top of all that, we’ve made promoting effective competition in the interests of consumers one the FCA’s key objectives.
And we’ll soon be introducing legislation for a number of new measures in this area, including improving access to SME credit data, which will enhance the ability of challenger banks and alternative finance providers to conduct accurate risk assessments, and make it easier SMEs to seek a loan from another lender.
We also have proposals to help to match those SMEs that want to secure loans with those challenger banks and alternative finance providers who want to provide them.
All of which are moves that will make the sector more competitive, and give consumers more choice.
Transparency in the sector
Key to improving competition is improving transparency.
In SME banking, our key change has been the obligation to publish postcode lending data, which is promoting greater competition and enabling smaller lenders – both banks and non-banks – to see where there is unmet demand and pursue new business.
In particular, it has highlighted the more deprived areas where larger banks are often not willing to lend, and that will enable:
- challenger banks
- smaller building societies
- credit unions and
- Community Development Finance Institutions
…to move into these areas, and to offer finance to those customers who are crying out for support to help their business grow.
Business Banking Insight survey
So we have identified problems.
And – more importantly – we are identifying solutions.
And this new survey – and its findings – will play a key role in helping us to build on that action.
It is – as many of you will know – the first survey of its kind to look at the performance of Britain’s banking sector, as perceived by Britain’s business people who own and run their companies.
And it will help to provide an insight into, and a ranking of, the best banking institutions and products and services for Britain’s micro, small and medium sized businesses.
So, for example, a tech start-up in Edinburgh looking to move to bigger premises will be able to see which bank offers the best loan facilities.
Or a microbrewery in my constituency of Northamptonshire looking to sell its product in Europe will be able to see which bank offers the best Export Finance facilities.
The hope is that with that improved knowledge, SMEs will have an improved incentive to switch providers to those banks that are best placed to provide the support and the services they need.
And not only will it be a great tool for them. It will also allow Britain’s banks to see what their customers really think of their performance, and allow them to target areas for improvement.
By allowing them to see areas in which their competitors are offering better, smarter, and more popular products. And also areas where their customers aren’t happy with the service they offer.
And the upshot of all that should be better competition, better products, and – most importantly – a better environment for British businesses to go about their work.
So I’m very glad to be here this morning.
I’m particularly delighted to be launching a survey – as commissioned by the Chancellor – that will genuinely help businesses to vote with their feet on which bank is best for them.
And I’m very much looking forward to working with all of you to help drive improvement in this area over the next twelve months. And hearing any ideas you might have that could make it even more useful for British businesses.
But before that, I’ll be very interested to hear about all the findings of the survey. Thank you.