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TSB’s reliance on Lloyds IT could impair new bank's competitiveness

Karl Flinders

New high street bank TSB might struggle to be competitive in the market due to its reliance on the IT systems of Lloyds Banking Group (LBG), according to the Office of Fair Trading (OFT).

TSB was formed when  a set of branches under the codename Project Verde separated from Lloyds Banking Group. It will see TSB launch alone with five million customers, eight million accounts, 8,000 staff and 632 branches. But because TSB's systems are run on LBG's IT platform, the OFT has concerns over TSB's ability to compete.

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In a letter to Chancellor George Osborne, OFT CEO Clive Maxwell said the OFT was concerned that the “business and IT services agreements with LBG may impair Verde’s ability to compete independently in the market”.

The letter said LBG and the Project Verde organisation were negotiating an IT services agreement that will see LBG supply to TSB: “We recognise LBG’s assurances about Verde’s ability to modify and innovate and the efforts made to reduce the overall cost base for the IT platform and the overall benefit that a transitional arrangement can provide stability for Verde in its early years," wrote Maxwell.

"However, there remain concerns about the impact on competition arising from any Verde dependence on LBG, the influence that LBG will retain over the operational flexibility of Verde, including its ability to innovate and differentiate its product offering, as well as any information flows between the parties.”

The letter added that Verde would be constrained in the small to medium-sized enterprise (SME) sector because it lacks the IT functionality to provide complex business banking services.

Co-operative Bank pulled out of a £750m proposed deal to take over Verde. It blamed poor economic conditions for its decision.


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