Within minutes of the new bank going live, both customers of the newly separate TSB and Lloyds brands lost access to their accounts. Only Bank of Scotland customers were able to access their accounts online.
All 185 Lloyds branches in Scotland, along with four Cheltenham & Gloucester sites have been spun off to the new TSB bank - as well as a further 446 Lloyds branches in England and Wales.
The bank, which employs 8,500 staff, has declared itself a “community bank” and insists it is heralding a return to a model of “local banking” pioneered by Scot Reverend Henry Duncan who established the first Savings Bank in Ruthwell in Dumfries and Galloway more than 200 years ago.
With a pledge to focus on individuals and local firms, TSB - which was taken over by Lloyds in 1995 and is now making a comeback as a standalone brand after an 18 year gap - is keen to make a clean break, free of the “legacy issues” such as payment protection insurance (PPI) mis-selling that haunt much of the sector. It plans to issue regular reports for each area of the UK, detailing the amount of money it holds in savings and the amount loaned to local indivduals and businesses.
“This is exactly what we’re doing again today as we bring the new TSB Bank back to over 600 communities across the UK to fuel their local economies – and nothing else,” said Paul Pester, TSB’s chief executive.
The new bank came under fire from consumer experts for a lack of innovation and the same “low rates” as its sister brand, Lloyds. However, TSB said that it will, over time, launch new products and services as it separates from Lloyds Banking Group.
“TSB may be a new bank today, but it doesn’t have any new products,” said MoneySavingExpert.com creator, Martin Lewis. “This means its customers are mostly sitting on the same old Lloyds bank accounts, savings and credit cards, with rates so low the best buy tables giggle with mirth.”
Mark Garnier, a Conservative member of the cross-party parliamentary committee on banks, also expressed doubt: “TSB is certainly not the answer. We want entrepreneurs to come into the marketplace and start opening banks,” he said.
TSB, which was created so that Lloyds Banking Group would comply with EU rules aimed at bringing more competition to the UK banking market, boasts more than 4.6 million customers and over £20 billion of loans and customer deposits. A total of five million customers have switched to the new brand, but 4,000 have already said they want their accounts to remain with Lloyds.
It will ultimately be sold off as a stand-alone concern - though it is expected that the UK Treasury, which owns 39 per cent of Lloyds Banking Group, will ask Brussels for an extension to the current sale deadline of November this year.
António Horta-Osório, chief executive of Lloyds Banking Group, added: “The presence of these two strong brands on the UK high street will provide more choice to our customers and the wider market. The changes reinforce our commitment to better serve our customers as well as delivering a stronger and more competitive banking industry in the UK.”
Other consumer champions welcomed the new brand, saying it would bring competition to the high street.
“The launch of TSB bank today can only be good news for consumers as it creates greater competition on the high street,” said Kevin Mountford, head of banking at MoneySuperMarket. “Entering the market with the eighth largest branch network in the UK, this brand immediately has the scale to be a meaningful challenger to the big four banks.”
Richard Lloyd, executive director of Which? said: “The current account market desperately needs more competition and TSB has a golden opportunity to offer something different to attract new customers.
“Both TSB and Lloyds customers should now have received information about how the changes affect them. If anyone is unsure of their options, they should contact their bank.”
A spokeswoman for Lloyds Banking Group said there had been a “temporary issue” with its internet banking service but insisted the problem had been resolved.
“The issue is now completely resolved and we apologise to customers for the inconvenience this will have caused,” she said.
Q I have an account with a Lloyds branch in Scotland and have been transferred to the new TSB. What will happen to my account?
A All Lloyds customers in Scotland have been transferred over to TSB, as all 185 branches north of the Border are now part of the new bank. Sort codes and account numbers have not, and will not, change and your credit history is unaffected.
Q I am now a customer of the new TSB, but my credit and debit cards are still branded as Lloyds TSB. Will they work?
A Existing debit and credit cards will continue to work – but they will, over time, be replaced with TSB-branded versions when the card expires. New customers will be issued with a TSB branded card.
Q I have a mortgage with Cheltenham & Gloucester. What will happen to it?
A Your mortgage will be transferred over to TSB, as all branches of C&G have been switched to the new bank. TSB will honour any existing rate deals you already have in place, meaning that your payments will stay the same. New products – which could be better or worse than those already on offer from Lloyds – will be launched by the bank in due course as it separates from Lloyds.
Q I live in Scotland, but for historic reasons, have a Lloyds account with a branch in England which will not become part of TSB and I will remain a Lloyds customer. I have always been able to go into my local Lloyds branch in Edinburgh to do my banking, but it will now become part of TSB. Will I still be able to use TSB branches in Scotland?
A All branches of Lloyds in Scotland are to be rebranded TSB. This means that if your English branch is not one of those which will be switched to the TSB brand, you will remain a Lloyds customer. However, TSB will allow you to continue to use their branches for an as yet unspecified grace period.
After that period, you will still be allowed to bank at Bank of Scotland branches north of the Border, as they are owned by Lloyds Banking Group. The same will not apply to TSB, as Lloyds Banking Group expects to sell it off in the near future.
This problem is not as likely to exist for customers living in England, as even if their nearest Lloyds branch is being transferred to TSB, there is likely to be another Lloyds branch nearby.