Euro worries fuel growing consumer fear for safety of local banks

ALMOST one in five Scots are worried about the safety of their high street bank as fears of the impact of the eurozone crisis weigh on UK lenders.

A YouGov survey for accountancy firm Deloitte showed that 18 per cent of Scottish consumers are more concerned about the safety of their bank than they were a year ago at the height of the banking crisis. This is despite UK government support for major players in the Scottish market such as Royal Bank of Scotland, which is 84 per cent owned by the taxpayer, and Lloyds Banking Group, in which the state has a 41 per cent stake.

But as Ireland agreed a €85 billion European bail-out, fears that the deal may not staunch the crisis spreading to other countries such as Portugal, Spain and Italy were a major concern for many UK banks which have billions in outstanding loans to peripheral European states.

The YouGov survey also shows there is appetite in Scotland for an increase in the number of banks serving the market.

Almost one in three consumers in Scotland wished there were more banks to choose from on the high street, while almost a quarter of Scots were interested in opening a savings account with a non-traditional lender such as Tesco.

RBS and Lloyds together dominate both retail and commercial bank business in Scotland, which has led to two members of the government's Independent Commission on Banking to suggest that Lloyds should have its merger with lender HBOS unwound in an effort to increase competition. Lloyds is also set to sell 185 branches of its TSB business in Scotland to a new entrant by 2013.

Deloitte said that "the time is right" for new entrants to capitalise on consumers' desire for more choice in the retail banking sector in Scotland - as long as their service offering was "spot on".

Another report, by South African-owned bank Investec, showed that business customers are looking for better options too. It found that 41 per cent of UK businesses with an annual turnover of 1m or more planned to switch 4.78bn of their savings into accounts offering better returns.

Yet Britain's bank bosses risk angering their customers further by opting to accept their bonuses for the first time in two years, taking home a combined payout of up to 15m.

Stephen Hester, chief executive of RBS, is in line for a bonus of up to 2.4m, while Eric Daniels, the outgoing chief executive of Lloyds, could receive up to 2.3m. The chief executives of Barclays, HSBC, Lloyds, RBS and Standard Chartered have previously waived their payments or donated them to charity, but this year are said to be minded to keep the money.

The controversial move comes as the same chief executives are understood to be in discussions over a joint plan to cut the bonus pool and boost lending to small businesses in an effort to quell public anger.