Action on bank review

The Treasury is likely to announce this week that it is to act on some of the main recommendations of the Don Cruickshank review of the banking industry, including his suggestion for a new regulatory body, dubbed paycom, for the payments part of the system.

However, it is not clear whether the paycom that the Treasury will sanction will have the scope envisaged by Mr Cruickshank, who called for a regulator to cover every aspect of the payment system from cash machine networks to cheque clearing and small business banking.

The publication of the Treasury report comes at a crucial period for leading banks, which are in the midst of telling the City and investors about the level of profits. HSBC, Barclays and NatWest, now part of Royal Bank of Scotland, are all scheduled to publish their profits in the coming days while Lloyds TSB reported its results last week.

The banks are at loggerheads with the government over its plan to set up a universal bank in post offices.

It is the four clearing banks which the Cruickshank report focused on. They hold almost 70% of current accounts and most of the banking services provided to small businesses, making it difficult for new competitors to take any meaningful market share.

Part of paycom's potential scope is already being scrutinised by the competition commission which is investigating small business banking, another recommendation made by Cruickshank, who also highlighted excessive charging for cash machine withdrawals.