Angry bank customers have been voting with their wallets and bombarding co-ops, building societies and credit unions with applications for current accounts over the past week, after the NatWest computer meltdown and the Barclays rate-rigging scandal.
Data compiled by the campaign group Move Your Money UK shows an explosion in requests to switch from large high street banks to smaller alternatives that consumers hope will take a more ethical approach. Charity Bank, which lends its savers' money to charities, has seen a 200% increase in depositors; the Ecology Bank has had a 266% jump in applications; and Triodos, a Bristol-based "sustainable bank", a 51% increase.
Credit unions, which are often small institutions investing people's savings in their local economy, have seen week-on-week increases of at least 20%, some of them up to 300%. Evidence of the growing number of switchovers comes as Ed Balls, the shadow chancellor, on Sunday calls on the government to make it easier for consumers to switch to another bank or building society. Speaking on the BBC's Andrew Marr Show, Balls will say that while people are increasingly dissatisfied with their banks, it is still too difficult for customers to switch accounts. He told the Observer: "Ministers are dragging their feet on reforms to improve competition and consumer choice in the banking sector. Consumers must come first. It's time for action."
Consumers have been looking for alternatives to the mainstream banks to protest about the revelation that Barclays traders conspired to fix a key interest rate over a number of years; and the IT chaos that left millions of RBS customers unable to access their accounts.
Since the start of this year, Move Your Money UK estimates that an average of 80,000 savers a month have been leaving the crisis-prone banking giants – a total of almost half a million since the start of 2012. The Co-operative Bank, which has seen a 25% rise in applications over the past week, hopes to capitalise on the public's frustration by trebling its number of branches to 1,000, if it can clinch a deal to buy 632 from Lloyds Banking Group.
Lloyds, which was bailed out by the taxpayer during the financial crisis, was ordered by Brussels to sell the branches when it took over the troubled HBOS.
Co-op's unusual management structure, with a board that included a Methodist minister and a plasterer, had initially caused some concerns at City regulator the Financial Services Authority, but the takeover now looks close to being completed, and Co-op hopes it will enable it to become a major player on the high street. The coalition, which has said it would like to see more competition in the banking sector, is also keen for the Co-op to succeed.
Move Your Money has organised community events and protests to publicise alternatives to the so-called big five — Barclays, Lloyds, HSBC, RBS and Santander. "There's a decline in trust," said spokesman Louis Brooke. "You can lose your trust in a bank because you don't believe they've got enough money, a la Northern Rock, but that's not what's going on here; it's that people no longer see the banks as legitimate institutions."
Adam Scorer, director of external affairs at the advocacy group Consumer Focus, said: "Consumers have decided to mete out their punishment by moving away from banks who have been tarnished by recent events and revelations. RBS have failed on the basics of managing their customer accounts. Barclays have failed on the basics of behaving with honesty and integrity. These might be very different issues, but they both degrade the reputation of banks in the eyes of their customers." Many British banks shifted from being "mutuals" – owned by their customers – to shareholder-owned public companies in the 1980s and 1990s, in a wave of "demutualisations", seen as making them more successful. But as bankers' pay has exploded, and profits flowed to shareholders rather than savers, a growing number of people have begun to warm to the idea of old-fashioned mutuals, including building societies.
Andy Haldane, the executive director for financial stability at the Bank of England, has also suggested that new alternatives, such as peer-to-peer lending companies, which connect borrowers and savers, could eventually become rivals to the banks.
