Thomson calls for revolution in Scots banks

FINANCIER Ben Thomson has given the clearest indication yet that he wants to lead a revolution in Scottish banking and has called for the break-up of Lloyds and Royal Bank of Scotland to go further than currently planned.

Thomson, a close adviser to the First Minister Alex Salmond, said now was a "critical" time to persuade the UK government to do so. The government has an 84 per cent share in RBS and a 43 per cent stake in Lloyds.

"There is a critical point at the moment, where we can influence what happens to the big banks. There is a chance at the moment to create Scottish banks headquartered in Scotland," Thomson said.

He refuses to say whether he will participate in a bid for Lloyds Banking Group's TSB branches in Scotland, which are due to be sold following an edict by the European Competition commissioner Neelie Kroes. But Thomson remains a frontrunner. He said he would "strictly support anything" that would lead to the establishment of an independent Scottish bank.

Following in the footsteps of his father, who was a City investment banker and British diplomat, Thomson is taking a more active role in politics through his think tank Reform Scotland as well as his continued involvement in the Financial Services Advisory Board (Fisab), a Scottish government and industry body chaired by Salmond. Thomson confirmed there was a "robust" exchange of views at its last meeting in December, which was attended by Salmond, John Swinney and Jim Mather.

Thomson is stepping back from the chairmanship of investment bank Noble, following its merger with Londonbased stockbroker Execution last month. He brokered the deal to form Execution Noble, in which he will remain a shareholder and a non-executive director. He continues to chair the National Galleries of Scotland one day a week, responsible for raising 50m to acquire the second Titian. He also chairs Barrington Stoke, a specialist publisher for "reluctant readers" founded by his mother and his wife.

Thomson, who was last year involved in a potential bid for The Scotsman, said he was actively evaluating potential acquisitions in the banking and media sectors in Scotland.

"My job is to look at opportunities that arise like that," said Thomson. "If the opportunity arises I will get involved and put some of my own money behind these things, where others put money behind them, and take a role where I believe they will be successful doing what Scotland has traditionally done best.

"For a country to have a strong identity it needs to have some strong financial institutions inside it. It also needs a strong media," he added.

Currently, Lloyds and RBS are required to sell branches. Lloyds must offload the high street offices of its mortgage arm Cheltenham & Gloucester together with TSB in Scotland, while RBS must sell its business banking units in England, its branches in England and Wales, as well as its insurance division and its stake in California-based commodities trading venture Sempra. Last week, it sold parts of its asset management business to Aberdeen Asset Management for 84.7 million.

But Thomson is arguing for the break-up to go further, with Lloyds demerging to create at least four or five smaller banks – Lloyds, TSB, Halifax and Bank of Scotland.

Although he admits the banks' senior managers – Eric Daniels of Lloyds and Stephen Hester of RBS – are resistant to further break-up, he believes current government policy allowing the banks to remain in their current form threatens their competitiveness. He says the "narrow bank" model – as advocated by Professor John Kay, a member of Salmond's council of economic advisers – would allow for the establishment of more, but smaller, banks that could be listed on the Stock Exchange.

"You have a lot of businesses in these banks that have a Damocles sword hanging over them. Who wants to be in the Lloyds TSB if you know you are going to be sold? How are you going to build value in the next four years?" said Thomson.

On Tuesday, bank chief executives Hester, Daniels and Gary Hoffman of Northern Rock will appear before the Treasury Select Committee at Portcullis House. The session is set to cover remuneration policy, lending policies, competition in the banking sector and timeframes for a return to full private ownership.

Lloyds closures

Lloyds Banking Group will shut seven Scottish branches, with three in Edinburgh due to close on Friday. The closures are in addition to the 185 TSB branches which Lloyds will sell off as a result of a ruling by the European Competition Commissioner.

Bank outlets on North Bank Street and Chambers Street will be shut down and sold off, with the bank opening a new branch nearby on the Royal Mile in the Hotel Missoni.

Lloyds will retain the property of its outlet on Castle Terrace with a view to leasing to a potential restaurant or bar.