The news about the loss of hundreds of jobs at Cheltenham & Gloucester comes as a minor surprise. The rationale behind the decision seems to have been to reduce the over-supply of high street branches across the UK. Arguably this should (and could) have been done much earlier – after all Lloyds have allowed this situation to persist since taking over C&G in 1995. Since then C&G focused on what they had been good at; mortgages and deposit accounts.
Over the last 15 years or so we have witnessed many Building Societies become Banks and then get swallowed up in the pursuit of market share. The consequences of the banking sector gradually shrinking seems to have been largely ignored. You may remember the Barclays TV advert featuring Anthony Hopkins suggesting that being a big bank is quite a virtue. Yet one cannot help thinking that many of the reasons behind the current financial crisis are due to not really knowing your customer, one of the basic principles of financial regulation.
The most notable development in Banking over the last 15 years has been online banking. For many of us this has made life considerably easier. However aside from convenience, it is difficult to see where advantage has been derived from bigger banks, indeed fewer suppliers means reduced competition and choice. We seem to become less with more. The high street is increasingly homogenized. It becomes very difficult to be distinctive. On a practical level this means less choice for mortgages and deposit accounts and therefore increased power of the supplier, which is always likely to cause concern when the product is essentially access or availability to money.
This cannot be good for competition, or any likelihood of returning to sensible lending based upon knowledge of circumstances. In the pressure to achieve increasing market share and profitability, lending decisions become a conveyor-belt of tick boxes. Online money portals operate in this way, with little real knowledge of the individual and assume that everyone is the same (not equal). Our own software reveals flaws in the “system”. We know (due to relationships and the quality of our clients) that some lenders will go outside of their “tick box mentality” and trust our knowledge and advice based upon the history between us. This is an often overlooked advantage of using an IFA, it is not simply that we do the shopping around, but primarily what and who we know.
I quite liked C&G as a mortgage lender, good products and pretty good service – with one of the best mortgage application forms. There is more of the same to come with Alliance & Leicester, Bradford & Bingley and Abbey all becoming Santander. I can certainly understand the logic in that there is no need to have 2 branches when one will suffice. It occurs to me that one of the main arguments for merging is that 1+1 =3. I wonder though if the management consultant types might consider that 2-1= ½. Perhaps more creative ideas could be used to actually improve banking services with the increased capacity..?
A friend of mine is a fan of BBC comedy sitcom The League of Gentlemen and would take delight with his “you’re not local” sketch. I’ve not seen more than 5 minutes of the programme but, whilst it parodies the often decidedly odd “local” customs, it also seems to reach a sense of connection to place. When we lose local building societies (and I do understand that the world has moved on) we also lose a sense of the local community. Local businesses exist based upon reputation; those with good reputations tend to provide a good service, perhaps a fantastic service. I have yet to find a big business that maintains any sense of the personal that continues to provide high quality goods and services, but am open to persuasion - that big banks mean better service (but my experience suggests exactly the opposite is true). So RIP C&G, BBB, A&L et al...
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