As the banking crisis loomed in 2007, lines formed outside branches of the Northern Rock bank. This run on the bank exacerbated the perilous state of the Rock’s cash flow crisis. Ultimately, the British government stepped in to prevent a banking catastrophe, and before we hit the bottom of the recession, Northern Rock, Royal Bank of Scotland, Lloyds TSB, and HBOS had all been saved from collapse with government bailouts.
Things have changed in banking today. The economy is growing again – though not very fast – and several banks are posting reasonable performance figures, but the government in the UK retains a significant share of those businesses saved from collapse, in several cases the government owns a majority share making companies like Northern Rock and Royal Bank of Scotland effectively nationalised institutions.
The government has changed since then. Gordon Brown’s Labour party did better in the general election of May 2010 than might be expected given the scale of economic collapse, but not well enough to hang on to power. The coalition government led by Prime Minister David Cameron seems likely to honour the promise given by Brown, to sell off the government stakes in these nationalised banks as soon as the economy is strong enough to support it.
That time is approaching – there is often talk in the markets of when and how the government assets might be sold. The idea of giving away shares to British people was even floated!
However it happens, this could lead to very exciting times ahead for the consumer and those in industry with an interest in marketing and competition. Not only is there now a regime of regulation that means bankers need to be more transparent and to look after their customers better, this asset sale should create a huge wave of new banking brands on the British high street.
Retail giants Sainsbury’s and Tesco both have banking operations, Tesco is run largely internally and Sainsbury’s in partnership with Lloyds banking group. Sir Richard Branson’s Virgin group has already expressed interest in taking over the whole of Northern Rock.
These new banks all need to scale up quickly, creating retail branch networks and customer service operations from scratch. This gives them a chance to think about how best to work with customers of banking services and cloud change the nature of retail banking in the UK for decades to come.