COMMERCIAL-IN-CONFIDENCE
for 1991 (fully disclosed and excluding minority interests) were £707 billion.
COMPETITION IN BANKING
7. The Bank of England has given the Office a very helpful overview of the current structure of banking in the UK and the
In current state of competition (copy attached, Appendix I). summary, the Bank considers that UK banking, at the moment, consists mainly of two large clearers (Barclays and NatWest), which have global presences, and two smaller domestic clearers, Lloyds and Midland. Recently, however, retail banking has expanded significantly because of:
(a)
Deregulation of the Building Societies (BS)
Since the collapse of BS Cartel, and the passage of the 1986 BS Act, Societies have been able to offer deposit and money transmission products as well as borrowing in brokered wholesale markets - in direct competition with banks. BS can also offer a certain amount of unsecured lending. BS now account for 59 per cent of all bank and BS lending to the personal sector.
(b) Entry of foreign banks
The Bank suggests that lending by foreign banks to the corporate sector has increased from 25 to 35 per cent in twenty years, although it notes that no bank (other than National Australia Bank) has opened a significant branch network.
(c) New UK entry
Girobank, TSB, Bank of Scotland and the Royal Bank of Scotland have also successfully challenged the Big Four in recent years.
All these developments seem likely to reduce the dominance of the Big Four particularly in the corporate sector, although it is clear that there is still some way to go.
MARKET OVERLAPS
8. Lloyds' and Midland's activities clearly overlap to a considerable extent, whereas this is not the case with HSBC. HSBC has no involvement in retail banking in the UK, and only in the gilt-edged market would the proposal create a share of more than 10% (22% is suggested). Moreover the gilt-edged market is very open and competitive; trading is largely screen-based and there are at present 19 gilt-edged market makers (GEMMS) licensed by the Bank of England, with others known to be wishing to enter.
9.
According to most aggregate indicators of liabilities and assets, Lloyds and Midland are significantly smaller than
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COMMERCIAL-IN-CONFIDENCE