BSN Stock Photo

The part-nationalisation of two of the major financial banking institutions in the United Kingdom came as the undeniable final sign that the country was facing a considerably dire economic recession. In both cases, the institutions had made poor financial decisions that resulted in unmanageable debts and the requirement for Government intervention.

David Brown explores the latest news that these banks are to be broken up and examines the effect this could potentially have on customers now that Government intervention has been fully established and executed with this new announcement.

News that the two Government-backed major financial institutions have decided to break up parts of their business comes as welcome news to advocates of personal consumer focused banking. The Lloyds Group and the Royal Bank of Scotland Group have announced plans to sell parts of their respective businesses which the Government intend to be sold to emerging new banks.

The Government’s Chancellor of the Exchequer has detailed this as a way of maintaining the stricter sanctions on financial institutions, particularly for those within the personal finance sector.

He said: “One of the many lessons we have to learn is keeping a very rigorous eye on competition available on the high street.”

Along with tighter controls implemented on the consumer credit sector in bids to reduce irresponsible lending and the uptake of debt solution processes such as Individual Voluntary Arrangements (IVAs) and bankruptcies, the creation of new competition within the banking sector shows that there is a strong emphasis upon cultivating better attitudes to credit. The highlighting of behaviour towards individuals’ personal finance shows that there are serious conscious attempts to tackle the UK’s personal debt problems.

Experts are predicting that the major bank’s decisions to break apart their groups demonstrates that there is a recognised need to re-establish their independence, whilst consumers are likely to benefit from a more diversified market. Within banking throughout the period prior to the recession, the major banking institutions such as Lloyds and RBS were been able to compete on the price of products, relying upon their market share.

However, subsequent to the economic crash, the diversification of the banks appearing on the high street will allow a focus upon consumer satisfaction in customer service to come to the fore. In analysing the possible interplay between consumers and emerging banks based upon customer service, it is plausible to predict earlier intervention in personal financial difficulties, allowing for a reduction in the requirements for debt solutions that arise as a result of avoiding issues of debt.

It is fair to assert that consumers would welcome a more customer-focused approach to the management of their personal finances. For those already in difficult financial situations following the economic recession, the more personalised service may enable them to balance their finances before serious debt advice or intervention may be required.

About the Author:

This article was written by David Brown on behalf of IVA.net – a website providing free information, tools and guides on debt, debt solutions and successful personal finance management.