The Cruickshank report on competition in UK banking: Assessment and implications
| Published date | 01 February 2001 |
| Date | 01 February 2001 |
| DOI | https://doi.org/10.1108/eb025071 |
| Pages | 161-170 |
| Author | Michael Wolgast |
| Subject Matter | Accounting & finance |
The Cruickshank report on competition in
UK banking: Assessment and implications
Michael Wolgast
Received (in revised form): 22nd March, 2001
Deutsche Bank Research, Grosse Gallusstrasse 10-14, D-60272, Frankfurt-am-Main, Germany;
e-mail: michael.wolgast@db.com
Journal of Financial Regulation and Compliance Volume 9 Number 2
Michael Wolgast is a Senior Economist at
Deutsche Bank Research in Frankfurt, and
a member of Deutsche Bank's 'Economic
and Banking Policy, European Integration'
unit.
Before taking up his current position,
he worked as an economist for the Federal
Ministry of Economic Affairs in Bonn and
for the German Savings Banks' Associa-
tion.
In Germany, Dr Wolgast actively contri-
butes — through his articles, lectures and
press contacts — to the public debate on
issues like banking policy, financial regu-
lation and old age provision.
Michael Wolgast graduated with a maî-
trise d'économie appliquée from
Paris-IX-
Dauphine and with a Master's degree in
economics from the London School of Eco-
nomics and Political Science. He took his
doctorate at Kiel University.
ABSTRACT
This paper
assesses
the Cruickshank report on
competition in UK banking from the perspec-
tive of
a
major private
sector
German bank.
The paper
starts
by
describing
the UK market
for retail banking and then the major
conclusions
and
recommendations
of
the
Cruickshank report.
The author expresses
considerable
doubt on the
report's findings of
high
prices and poor quality
of
service
and offers an alternative explanation
for the UK banks' high profitability.
The paper
concludes
by noting a number of
important implications which the Cruickshank
report has for
regulators
and banks internation-
ally.
INTRODUCTION
In November 1998, the Chancellor of the
Exchequer, Gordon Brown, commissioned
a report on the commercial banking indus-
try in the UK. The report was to examine
the level of innovation, competition and
efficiency in various submarkets, possibly
including a consideration of some of the
options for change. Don Cruickshank, an
erstwhile telecoms regulator — later to
become chairman of the London Stock
Exchange — was charged with the task of
conducting a corresponding 'independent'
review of banking services in the UK.
The final report to the Chancellor was
published on 20th March, 2000.1 As a main
result of the review, the final report said
that in all sectors of retail banking that had
been under investigation (ie payment sys-
tems,
current accounts, savings products,
personal loans and mortgages and financing
of small and medium-sized businesses
(SMEs)), competition was not effective,
and that British banks were able to make
excess profits in the order of £2 to 3.5bn a
year. The report also claimed to have
found excessively high prices and a low
Journal of Financial Regulation
and Compliance, Vol. 9. No. 2,
2001,
pp. 161-170
© Henry Stewart Publications,
1358-1988
Page 161
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