* Banking standards commission extended until April
* Commission member Garnier backs account portability
* Standards agenda to be stepped up next year
LONDON, Nov 23 (Reuters) - British 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 told Reuters.
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.
Conservative 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maintain outdated systems would be better spent creating an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," Garnier told Reuters. "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
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 that 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," Haldane said.
Although analysts say that such a move would cost several
billion pounds, Haldane does not believe it would be "out of
reach financially", given that banks are already spending
billions each year on IT, the majority of which is used to
maintain legacy systems. RBS, alone, is expecting to spend about
1.5 billion pounds ($2.4 billion) on implementing changes to its
IT systems this year.
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 290 million pounds for
manipulating key interest rates including Libor - one of a
number of scandals that have rocked the industry.
Its original remit to examine standards and conduct within
the industry shifted when it was asked to conduct
pre-legislative scrutiny of the government's draft banking
reform bill. The pre-legislative work has hogged the
commission's agenda so far, focusing on issues relating to the
separation of banks' retail operations from riskier investment
The commission has been asked to report its views on the
proposed legislation by Dec. 18. The inquiry will then be
extended until April, Garnier said, and the commission will step
up its examination of standards within the industry next year.
Garnier said that, though the inquiry was originally set up
in response to the Libor scandal, its remit was much broader.
"Libor is not the issue but a symptom of the problem, and we
are trying to get to the bottom of that problem. The issue is
culture and standards."
Among the areas of focus going forward will be how the
industry can avoid further mis-selling scandals. Britain's banks
are facing a bill of more than 12 billion pounds ($19 billion)
to compensate customers wrongly sold payment protection
insurance on loans and mortgages and the full extent of interest
rate swap mis-selling is still emerging.
The recommendations of the commission could have a major
bearing on how Britain's banking sector will look in future
years. HSBC Chairman Douglas Flint told the commission
that the bank's decision on whether it will stay in the UK had
been postponed until 2015, when it expects the regulatory
environment to be clearer.
The commission, which is led by Conservative MP Andrew Tyrie
and includes former finance minister Nigel Lawson and the next
Archbishop of Canterbury, Justin Welby, has a huge amount of
ground to cover in the coming months.
"It's a huge thing. It's the epicenter of the political
world at the moment," Garnier said.
($1 = 0.6271 British pounds)
(Editing by David Goodman)