What is the significance of the bank announcing that it is diluting a key part of the Lloyd’s job security policy but not implementing it until 1st January 2024? What’s happening in 2024?

We’ve always worked on the basis that whenever the bank says it wants to change a policy it was up to no good. It always had an ulterior motive that would inevitably result in staff being worse off in some way. This is no different.

Before we continue, I think it’s important to debunk one myth which the other unions keep repeating year after year. When they say: “Lloyds extended the severance terms” you could be forgiven for thinking that Lloyds could change the severance terms. It can’t. For Lloyds TSB heritage staff only, the severance terms are contractual and can’t be changed without the agreement of staff or the unions. The situation is different for heritage HBOS staff. The HBOS enhanced severance terms are not contractual, but the bank has never once shown any inclination to change them in 13 years.

It’s fair to say that the new Chief Executive Officer, Charlie Nunn, is a bit of a technology geek and so expect all things digital to feature heavily in his first address to Lloyds staff. In an interview he did a few years ago he championed the idea of hyper-personalisation. Hyper-personalisation is all about using permissioned, real-time data to generate insights that are customer-specific and enable banks, or any service provider for that matter, to offer highly tailored services. Whether bank customers want those services, as opposed to basic banking services that work on time, every time, is another matter. In the 2020 report on ‘The future of retail banking’, which Charlie Nunn sponsored when he was at HSBC from Deloitte – a firm of management consultants – he said hyper-personalisation was “imperative” for the future of banks.

The one thing that is holding back the big banks from offering such personalised services to customers in real time is out of date core banking platforms. Like all banks, Lloyds spends millions each year on maintaining its core banking platform, which is made up loosely connected siloed systems that have been cobbled together over the years, often as a result of mergers and acquisitions. In another report, produced a few months ago – ‘Core systems strategy for banks’ – McKinsey & Company, another firm of management consultants said: “a new breed of core banking systems has emerged in the last few years. They are, or will be, cloud-ready and open-banking compliant, and, in some cases, have very advanced architectures that make frequent feature releases easier. More importantly, they claim not to compromise on the core tenet of faultless transaction processing”. Mr Nunn was a Senior Partner with McKinsey before he joined HSBC.

Thought Machine & ‘Project Endeavour’

Members may recall that in late 2018 and early 2019 we published a series of Newsletters on a fintech start up called Thought Machine. Those Newsletters were picked up by the Financial Times, which published a series of articles detailing the bank’s plans to cut costs on the back of a new core banking platform.

To recap, Thought Machine was set up in 2014 by a group of Google engineers who developed, what they said at the time, was a revolutionary cloud-based core banking platform called ‘Vault’. It can do everything the bank’s current system can do but at a fraction of the cost, using a fraction of the staff and at speed. According to the consultants it will enable Lloyds to produce real-time insights into customer behaviours and will make it easier to roll-out new products and services quickly.

The plan was to roll it out to Intelligent Finance and then, if successful, move on to Birmingham Midshires and then Scottish Widows Bank. The Group’s core banking retail customers would then have followed before reaching its ‘North Star’ of a completely new core banking platform encompassing all the Group’s customers. Well, that was the theory.

Lloyds has spent the last few years and large amounts of money turning the theory in to reality but the complexity of the bank’s core banking platform – and the risk of a doing a TSB – have inevitably slowed the pace of change. Vault is already installed on Google cloud and the bank has migrated customer data from Intelligent Finance and Scottish Widows Bank on at least two occasions to prove that it can work. We understand those dry runs identified a number of problems but those are being worked through. The customer data was subsequently wiped from the Cloud. The bank is committed to rolling out ‘Vault’ and is pouring money into the project hand over fist.

Costs, Jobs & 2024

Lloyds already has one of the lowest cost to income ratios of any bank in the UK. If ‘Vault’ is ever rolled out across the bank – and that’s a very big ‘if’ at the moment – it would enable Lloyds to achieve a cost to income ratio that would match some of the digital banks.

And this is the significance of 2024. That’s when we expect the bank to fully roll out ‘Vault’ and up to 10,000 jobs could be redundant. Many of those jobs will be in areas like, accounting, IT and project management.

One of the main protections in the current Lloyds Job Security Policy is the guarantee that if members of staff are downgraded because of a reorganisation, they are guaranteed market movement pay awards for 3 years. We negotiated that protection specifically because it would allow staff to take downgrades knowing that their salary increases were protected. The bank is now proposing to do away with that protection at a time when we expect to see a major reorganisation which will affect thousands of jobs. The fact is that most staff who are protected by the current arrangements won’t get salary increases for a very long time, if ever, under the new arrangements.

And the only staff who will be disadvantaged by this new policy will be Lloyds and C&G heritage staff. Is it any wonder that Accord agreed to the change because most of its members are HBOS heritage?

The question is what other job security protections might the two in-house unions sacrifice over the next 12 months?

The bank knows exactly when, where and how many jobs will be lost as a result of the implementation of Thought Machine’s core banking platform and it should publish that information immediately. The bank should be planning for those changes now and giving those staff that will be affected the new skills to enable them to continue their careers with the bank or look for suitable jobs elsewhere. There is more than enough time to do that properly and that should be one of Charlie Nunn’s first commitments when he starts his new role properly.

Members with any issues they would like us to deal with on this should contact the Union’s Advice Team on 01234 262868 (choose Option 1).

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