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Savers! Watch out as Lloyds and TSB split
Consumers are being urged to keep an eye on 'new bank' TSB as it resumes life as an independent institution after 18 years.
Consumers are being urged to keep an eye on 'new bank' TSB as it resumes life as an independent institution after an 18-year gap.
TSB, which dates back to 1800 and merged with Lloyds Banking Group in 1995, is today formally spun off from the parent company. This is the price European regulators said Lloyds must pay for its state bailout in 2009.
The demerger has seen 4.5 million Lloyds customers with £25 billion of deposits transferred to TSB, making it the eighth largest high street bank with 631 branches.
Although TSB will not have its own range of accounts and products until next year - and will continue to use Lloyds' - it has the power to change Lloyds' savings and borrowing rates.
Anna Bowes of savingschampion.co.uk said: ‘The banks could tweak the rates and they may do that independently of each other so savers need to keep an eye on the rates both banks are offering and make sure they get the best deal.’
Unfortunately, Lloyds isn't likely to top any best buy charts soon. Its cash ISA pays just 1% on balances of over £5,000 and it's two-year cash ISA just 1.9% on £10,000 or more.
For those willing to lock in for three years, Lloyds offers 2.1% on savings over £2,000. Lloyds subsidary Halifax fares better in the savings stakes, paying 2.3% on its four-year fixed rate ISA if £500 is deposited.
The arrival of a new bank came as the regulator, the Financial Conduct Authority, launched a review of the £1 trillion cash savings market saying it wanted to ensure firms offered the public the best possible rates.
Next week, a further shakeup will occur when new rules take effect requiring banks to complete current account switches in seven days, rather than the current 30-day limit.
Although the separation of Lloyds and TSB officially starts today the final sale of TSB Bank will not be completed until the middle of next year when TSB is expected to list on the London Stock Exchange.
A spokeswoman for TSB confirmed the bank will have the power to change the rates of existing savings and mortgages. She said the decision to wait until January to launch separate bank accounts, savings accounts, and mortgages was to ensure ‘stability for existing customers’.
Lloyds, which is 39% owned by taxpayers, originally planned to sell the network to the Co-operative Bank but the deal collapsed earlier this year as financial problems emerged at the mutual emerged.
Lloyds TSB is effectively being divided into a 'good' and 'bad' bank with TSB on the 'good' side as it will start life with no 'toxic' assets and bigger reserves to deal with emergencies than Lloyds.
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by Gavin Lumsden on Dec 12, 2013 at 15:58