lawmakers are considering an overhaul of banks’ IT systems to stimulate competition by making it easier to switch accounts, a member of an inquiry into banking standards said.
The parliamentary commission is seeking ways to break the stranglehold of the few large lenders that have long dominated the British banking sector. The creation of IT infrastructure and the reluctance of customers to move accounts are viewed as two of the most significant barriers to new entrants.
Tory MP Mark Garnier said he supported proposals for a system that would enable customers to retain their account details when they move banks, adding that money being used to maintain outdated systems would be better spent creating an entirely new framework.
The former investment banker said that plans for banks to be given a strict seven-day deadline when transferring customers’ accounts to rival institutions did not go far enough and the commission is assessing a more radical solution.
“Seven-day switching is a red herring, it’s missing the point,” Mr Garnier said. “You cannot have 40-year-old systems. I’d like to see full account portability and a uniform IT system that makes it easier for challengers to enter the industry.”
The fragility of banks’ computer systems was laid bare this year by a software glitch that caused chaos for millions of Royal Bank of Scotland customers.
Speaking to the commission this month, Andy Haldane, the Bank of England’s director of financial stability, said he was keen on customer account details being stored in a “central utility-type function”. Haldane said banks would then “compete to plug and play into that central utility”.
“Once the information is held centrally it will become easier to switch both deposit accounts and loan accounts. This is potentially a transformational idea for the industry and one I hope it could embrace,” Mr Haldane said.
The commission was set up in July after the government came under pressure to scrutinise banks more effectively in the wake of Barclays being fined £290m for manipulating key interest rates.