I can understand why the Dutch bank ING Direct is selling its UK business to Barclays. It makes sense for ING to concentrate on markets where it has a large branch network and it’s getting a reasonable price from Barclays.
But this deal isn’t good news for the British consumer. The UK banking market needs more competition. That's the best way to ensure we receive better customer service and better products. But today's deal is only going to lessen competition.
ING Direct currently offers some attractive savings accounts and mortgages, and I fear that customers may lose out in the long term.
True, Barclays has said that ING Direct customers should expect their accounts to retain at least equivalent terms and conditions when the deal goes through next year. But I fear that will gradually change.
Even if I’m wrong, why take the risk of that happening? It would make much more sense for the ING UK business to be sold to a ‘challenger’ player such as Tesco, Virgin or Co-op. Today's news is a real shame.
That said, there is one positive aspect to the deal. It suggests that new Barclays boss, Antony Jenkins, wants to focus on the retail banking rather than the ‘casino’ investment banking business.
It’s also worth noting that the savings protection for ING savings customers will change as a result of this deal. If ING Direct went bust tomorrow, savers would be able to claim compensation from a Dutch government scheme. But once the deal has gone through, savers will be protected by the UK’s Financial Services Compensation Scheme (FSCS).
I imagine that Barclays and the former ING Direct business will share the same banking licence. So if you have currently have £75,000 with Barclays and £75,000 with ING, you’d only get protection up to £85,000 on savings worth £150,000.