In 1810 a Church of Scotland minister called Henry Duncan decided to set up a savings bank in the Dumfries town of Ruthwell for the benefit of the poorest parishioners in his parish. Rev Duncan felt it would be good to encourage everyone to save if even only a modest amount. Within years the trustee savings bank model was being adopted throughout the country and a quick interest search will find that many cities had their own version. The trustee savings banks provided a safe place for people to bank.
For a more detailed history of trustee savings banks see http://en.wikipedia.org/wiki/Trustee_Savings_Bank#Modern_history_of_the_trustee_savings_banks
Skip forward to 1985. Most of the trustee savings banks have now joined to form one large Trustee Savings Bank and the government (headed by someone called Margaret Thatcher – you may remember her) encouraged the TSB to float on the stock market. This would allow TSB to be a “proper” bank allowing customers the advantages of that. (Cue Rev Duncan turning in his grave at a rapid rate of knots.)
The TSB became “the bank that likes to say yes” as its directors tried to grow market share.
Skip forward now to 1995 and TSB is bought by Lloyds Bank plc. This was seen as a somewhat surprising move to many in the banking industry as Lloyds was regarded as a safe if somewhat conservative institution. It’s had recently acquired Cheltenham & Gloucester Building Society but that too was quite staid.
Now your blogger was an employee of the Lloyds Banking Group at the time (within Cheltenham & Gloucester plc) And although Lloyds had bought TSB, it appeared as if the opposite had happened. TSB practices started to take over and a sell anything to anybody approach seemed to take over. (Those of us in credit risk had our own slogan “TSB the bank that can’t say no”.)
Skip forward 10 years or so and now the Lloyds TSB Group finds itself going to the government for a financial bailout. Not helped by Lloyds having acquired the Halifax Bank of Scotland Group HBOS. The government injects £37bn into the bank and in return takes a 40% shareholding in Lloyds Banking Group.
On 27th March the Bank of England announced that it will require all UK banks to up their capital limits by £25bn across the sector. I’m more Ned Flanders than Stephanie Flanders, but I think that means banks will need to have larger reserves to fall back on.
What has emerged from this is that it will not be possible for the Government to privatise Lloyds Bank whilst it needs to raise its capital limits.
So here’s a radical thought. The government has a real opportunity to offer safe banking by allowing part of Lloyds to remain in state ownership or at least be mutualised. The latter model would chime with the Government’s desire to see more John Lewis style organisations. In other words create a trustee savings bank once again.
This model would be very similar to the German Sparkassen model http://en.wikipedia.org/wiki/German_public_bank
Go on George give it a try. It would be nice to stop Rev Duncan spinning.
