By Brian Milligan
Business reporter, BBC News
Lloyds Banking Group has to sell 600 branches
Bank customers could face more branch closures and higher charges, despite government plans to increase competition, it has been claimed.
Later this year the Treasury will start selling off nearly 1,000 High Street branches which are currently owned by the taxpayer.
But there are fears that many of those will fail to find buyers, and will be forced to close.
The Treasury says the sales will lead to more choice for bank customers.
Lloyds will have to sell 600 branches, including 185 TSB branches in Scotland.
Royal Bank of Scotland has been told to sell over 300 branches.
The government will also be selling off all 76 branches of Northern Rock.
The UK is soon to get its first new High Street banking name for some time
The idea is to attenuate the power of the big banks, and to promote competition amongst new entrants.
But Derek French, a former Natwest executive, who now campaigns to keep High Street branches open, fears that many of those branches will fail to attract a buyer.
Given that the number of banks has declined by 40% since 1990 anyway, the economics do not look attractive.
"I think we shall see fewer banks on the High Street rather than more," he said.
"There will effectively be less choice on the High Street than there is today."
But there is plenty of evidence that some banks not previously seen in the UK are keen to set up shop.
A new banking start-up, Metro Bank, is about to open its first branch in central London.
The hoardings outside already proclaim "love your bank," a sentiment which few customers probably feel at the moment.
"Trust" might perhaps be a more realistic target.
Inside a shiny new banking hall awaits its first account holders, complete with a giant Metro Bank logo.
Other possible new entrants, including French and Brazilian banks, have yet to declare their hands.
But MP Michael Fallon, a Conservative member of the Treasury Committee, is concerned that some of the new entrants may be specialist banks, catering only for the internet.
He is also worried that the likes of Tesco or Marks and Spencer would be "more interested in promoting retail sales than providing the range of services you'd expect from a high street branch".
To the rescue
So who will come to the rescue, and who might buy up to 1,000 High Street branches?
One obvious answer is Virgin Money, which tried to buy Northern Rock when it originally ran into trouble.
But when asked about the number of High Street branches it might need, its chief executive was non-committal.
"I suspect initially we will start with a few branches," Jayne-Anne Gadhia told BBC News.
"Over time though I would hope we will have hundreds of branches, rather than a handful of branches."
But as yet there is certainly no promise to buy any of the banks that are for sale. It will depend on the locations, and the price.
One other consequence of the government changes in banking is likely to be higher costs for account holders.
Tougher regulation means banks have to communicate more thoroughly with their customers, as well as regulators.
Banks also have to hold more substantial reserves, to ensure greater financial stability in the future.
Inevitably that means higher costs for banks.
Ralph Silva, a banking analyst, believes customers will therefore have to pay up to 15% more for banking services.
"We're going to have to pay more for pretty much everything," he said. "Current accounts, credit cards, mortgages: the costs are going to be brought on us."
The Treasury says such costs are an inevitable part of securing the financial system.
And it is promising that selling off the 1,000 banks will lead to "significant" new competition in High Street banking.
It now has four years to complete the sales, and to prove its point.