Welcome back TSB – a shame you have to live in London

A few months ago I wrote a speculative column suggesting that TSB, which is to be reborn after being absorbed into Lloyds nearly 20 years ago, could – and should – be headquartered in Scotland.

After all, this is where TSB started more than two centuries ago. A third of the 631 branches being spun-off by Lloyds are north of the border and distance from the Capital would demonstrate that the new bank clearly wanted to be different from the toxic mess that has been made of the whole industry.

The challenge was taken up with energy and enthusiasm by Scottish Government and Scottish Enterprise, who put as much effort as they could behind trying to persuade Lloyds. Paul Pester, who is to head the new bank, heard the case for Scotland – lower costs, a trained workforce, good infrastructure – but he would not be moved.

The registered office will be at Henry Duncan House in Edinburgh, head office of the old TSB Scotland before 1995, and the new bank will use the TSB banking licence, but those are just cosmetics. There will be major processing centres in Scotland, Manchester and Bristol, but the headquarters and the decision-making stays in London.

TSB is being recreated at the insistence of the European Commission, which did what the UK Government failed to do and reacted to the dominant market share which Lloyds’ takeover of HBOS had created in important markets such as personal current and savings accounts and mortgages.  The UK banking market is a tightly held oligopoly, so any new entrant into the banking market is to be welcomed, but TSB will hardly be independent.

For years to come it will run its customers’ accounts on Lloyds computer systems.

The new bank should have a sporting chance of being a success. It will start life with a clean balance sheet, since Lloyds is keeping any bad debts and liability for mis-selling. But the top team is mostly composed of management consultants and accountants. Only one of the seven executive members is a career banker – so much for the recommendations of the Parliamentary Commission on Banking Standards.

TSB will not have to compete for customers – 4.5 million of them are being transferred from Lloyds without them having a say in the matter. They can always change back to Lloyds should they wish, but that would mean moving from the branch in which their accounts are held, so not many are likely to do so, especially as the new bank tells them on its website: “Other than the name of your bank, very little has changed.”

So much for increased competition.