The EU classifies Britain as one of the 28 member states to function as a single trading entity without any tariffs or border checks and a combined VAT system. On 23 June 2016, the UK electorate voted to leave the European Union. The withdrawal agreements have been postponed three times and is currently 31 January 2020.
I put money on Brexit , The EU Financial Commissioner, Jonathan Hill from Britain, still owes me a pound.- Jean Claude Junker, President of the European Commission (2014 -2019) (Baker, 2019).
What are the consequences of Brexit on the Banking sector?
Lloyds is a financial institution providing personal, business, private and international banking solutions. Lloyds being founded in the UK has a huge customer base and has acquired Halifax, Bank of Scotland and Scottish Widows. (bank, n.d.)
Brexit will have serious implications on the banks in the UK and EU because of change of regulations and operations. Lloyds bank has always strategized with acquisition and in order to prepare for Brexit Lloyds has secured the Berlin license. Hard Brexit being the likely outcome, banks need to cover European client coverage and Lloyds is acquiring banks with a reach in the EU. (Sinead Cruise, 2019)
How is Lloyds planning on tackling Brexit?
Lloyds being an organization which is more than 250 years old in the business, having its origin and history in the UK, has been forced to rethink strategies on how to manage to sell their products in Europe. Lloyds being Britain’s biggest mortgage lender and having an experience of being in the business for decades is following a trend of scattering their post- Brexit resources among many cities rather than basing all their operations in a single city. The new British regulations have forced the UK banks to run three continental units so that balance sheets are individually capitalized “ringfenced” and “non-ringfenced” entities. Lloyds has a non-ringfenced euro bonding business and thus to comply with the new regulations it is setting up a second subsidiary in Frankfurt and the third subsidiary at an unconfirmed location to back its Scottish Widows “closed book” insurance business. Lloyds employs human resource staff, finance, risk and a full management team which has around 300 people in Berlin. (Sinead Cruise, uk.reuters.com, 2018)
(Roberts-Phelps, 2001)
Brexit will result in the customers and client’s dissatisfaction because of economic crisis. So, Lloyds will have to change its organizational structure and utilize the reach of the banks or subsidiaries its acquiring. Robert Graham Phelps came up with the customer interaction cycle which explains how Lloyds can retain customers. Lloyds can build a targeted set of questions for each and every department like (Roberts-Phelps, 2001) :
Does the EU have any suppliers from the EU 27 states and from where?
What are the tariffs for the goods received from the EU and what are the quotas for free tariff?
What private data received from the EU is reliable?
These types of questions can be framed for all departments such as finance, ops, HR and customer services so that the company can identify the drawbacks (Perera, n.d.).
On the event of a no-deal Brexit the UK will start following the WTO (World Trade Organization) rules and trade with the EU as a MFN (‘Most Favoured Nation’) tariff basis will end. The WTO rules state that there will not be any preferential treatment for any country and hence the tariffs will still be applied . (Lloyds, n.d.) (Lloyds, Lloydsbank.com, n.d.)
The Goal Setting Theory :
Edwin Locke came up with the Goal Setting Theory which states that with appropriate feedback it leads to increase in task performance. This theory proposes that a company’s (Edwin A. Locke, 2012) employees must be provided with a clear, measurable, realistic and challenging goal which in turn will lead to directing the focus towards achieving the goal. The more challenging the goal is the better the reward and drive to achieve it. Lloyds needs to set clear goals on how to dominate in the EU market and promote growth of the company. The limitation of this theory is that goal setting increases job satisfaction and complex goals promote unusual behaviour. Brexit is going to stimulate doubt in the employees as well as the customers. Hence Lloyds needs to motivate employees which will promote efficiency in turn the company will make a good image in the EU market which will result in a loyal customer base. (Edwin A. Locke, 2012)
(Edwin A. Locke, 2012)
“An important part of our focus is therefore to anticipate the shifting trends across the main UK trade corridors globally and to make sure we are able to offer trade finance to solutions to our clients into the key markets for them.” – Chris Spedding, Managing Director, Head of FI Trade, Global Transaction Banking, Lloyds Banking group (Chris Spedding, n.d.)
Will Brexit make fraudsters more active?
Another serious problem with Brexit is fraudsters increasing their activity to take advantage of the EU exit situation. The scams might vary from emails with EU exit content containing malicious software to phone calls, mails and texts to disclose personal details as a reason to take action against the EU exit situation. This can cause a serious threat to the company’s brand image while trying to expand their company across the UK border and trying to dominate the market. There are campaigns that Lloyds is associated with like the Take Five campaign which gives advice to people. There are also fraud guidance brochures online on the official website. Lloyds will need a dedicated team for fraud and the company has provided different toll free numbers where the customers who think are victims of fraud can call immediately which provides a great sense of assurance and reliability to customers (Lloyds, lloydsbank.com, n.d.).
Value of Online banking fraud losses in the UK from 2010 to 2018 (Cherowbrier, 2019) :
Conclusion:
Change management and leadership is a process that needs to be initiated from the top-level leaders who will provide a direction to all their subordinates. There will always be room for improvement and the banking sector (Lloyds Banking Group) will be able to overcome the implications of Brexit over time provided there must be productive efforts from the company itself. Lloyds Banking group have been making efficient efforts towards expanding the firm in the EU as well as retaining the brand image of the company.
References:
Baker, T. (2019, November 5). Juncker repeats claim that Johnson told ‘so many lies’ about Brexit. Retrieved December 8, 2019, from https://www.standard.co.uk/news/uk/brexit-latest-jeanclaude-juncker-repeats-attack-on-boris-johnson-as-he-says-pm-told-so-many-lies-in-a4278651.html
Our Heritage. Retrieved December 8, 2019, from https://www.lloydsbankinggroup.com/our-group/our-heritage/
Cruise, S. (2019, January 17). Lloyds secures Berlin bank licence as part of Brexit preparations – source. Retrieved December 8, 2019, from https://uk.reuters.com/article/uk-britain-eu-lloyds/lloyds-secures-berlin-bank-licence-as-part-of-brexit-preparations-source-idUKKCN1PB1ZA
Cruise, S. (2018, July 17). Exclusive – Lloyds Bank plans three EU subsidiaries after Brexit: sources. Retrieved December 8, 2019, from https://uk.reuters.com/article/uk-britain-eu-lloyds-exclusive/exclusive-lloyds-bank-plans-three-eu-subsidiaries-after-brexit-sources-idUKKBN1K71MO
Personal. Retrieved December 8, 2019, from https://resources.lloydsbank.com/insight/tariffs-explained/
Personal. Retrieved December 8, 2019, from https://resources.lloydsbank.com/insight/kpmg-quantify-your-brexit-risk/
Personal. Retrieved December 8, 2019, from https://resources.lloydsbank.com/insight/brexit-related-fraud-scams/
Business Insights 
That’s quite a positive and productive approach of the company towards a change it’s anticipating and will be facing shortly. By doing so the bank not only gains on the trust of the customers but also may attract new customers. The thing they’ve to keep in mind is, there will be similar productive steps taken by other banks so the need of the hour is constant change in strategy to protect their consumers and updating the skills of the employees for the same.
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Thank for your comment, yes their strategy as I have mentioned in the blog is acquisition by this they’re retaining their brand image as well as expanding the customer base. Brexit will have a huge blow on the banking sector and your view that many other banks will try similar productive steps is true but, Lloyds has been in the business for more than 250 years and has always been very consistent in the market in terms of coming up with new strategies and is a step ahead. Lloyds came up with a strategy even when there was a huge blow to their reputation when they were fined 58 million for HBOS fraud failings which is the highest fine imposed on a bank by the (FCA) Financial Conduct Authority. You can also have a look at the Lloyds bank website which shows their heritage and upcoming strategies to keep up in the market.
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Good job man your blog is interesting and I like the theory you used about the Goal setting theory which increases the task performance. And does it do effectively?
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Thank you for your comment! The Goal Setting theory is a very well known theory and it has its limitations like
-the competing goals might conflict with each other
-goals with higher risk strategies can lead to low-performance outcomes.
-this theories approach also does not account for actions motivated by your subconscious.
For other on the goal-setting theory please have a look at this link
https://ebookcentral.proquest.com/lib/coventry/reader.action?docID=1104793
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This is a great insight of how Lloyd’s is planning a strategy for Brexit. It’s amazing that their strategy is acquisition instead of expansion. I would like to know more about the regulations for trade post-Brexit even though it’s uncertain. Great job!
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Thank you for your reply! I will surely make a blog on the rules and regulations post- Brexit and have you notified. Since Lloyds has a very different approach to its strategies it has also invested a lot into moving its brand across the borders. Please subscribe for more informative content for business news, strategies, new agenda and exclusive content.
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Hai Srujan!
Great read on one of UK’s most trusted banks.
The goal setting theory has been explained clearly and gives the clients/readers an accurate insight on what to expect.
However, speaking of expansion, how do you envision it taking place?
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Thank you for your comment! As I have mentioned Lloyds Commercial Banking is a part of Lloyds Banking Group and has a long European history with an on-the-ground presence in key locations across the continent, including Paris, Frankfurt and Amsterdam. I think after they have recently acquired the Berlin license they’re going to gain the customer base there as well. Stay updated for more business news, financial news, investing news and in-depth analysis of the market.
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I agree with your view on Brexit. I do feel it is doing more harm than good. It certainly is giving every business in England,a run for their money. Lloyd’s bank seems to be two steps ahead a of the verdict. It shows that they are able to adapt to the times. It is a true mark of a good business. I do wonder, Since they are planning on opening banks in multiple countries, how will they carter to the different economic backgrounds of each country? What are your thoughts on how they could reach more number of people and carter to the different economic backgrounds of these people ?
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Hello! Thank you for your comment. I would like to say it is a game of predictions to guess that Brexit is going to do more harm than good. Lloyds has taken the necessary steps to be ahead and yes it is an investment to expand and acquire a customer base in a new market. They already have their branches in France, Netherlands, Germany and provide assurance to customers with financing, risk management, cash management, deposits and international trade. Their products are continuously evolving and expanding. Hence I think they will be able to tailor the needs of a customer base with a wide variety of economic backgrounds.
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A very detailed descriptive insight into the current chaotic economic growth due to Brexit (uncertain). Impressed with the strategies explained here to tackle the situation in hand!
Overall an excellent blog in hand!
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Trying to come up with a solution for a problem which has been debated and delayed for such a long time because everybody is unsure about it and trying to find a solution for such a situation is amazing and really courageous! Excellent piece of article
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This article has given me a lot of information on the Brexit . I didn’t realise that England leaving the EU would cause so much turmoil. Makes you wonder why they wanted leave in the first place. Brilliant move
By Lloyd’s bank .
Good job! The article was quite insightful. As a person who is from a different field, it does give a lot of information on the on going problems in business and trade in United Kingdom . Looking forward to read your next blog!
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Hi Srujan,
This is a very informative article on the brexit conundrum and the measures taken by Lloyds to overcome the same.
Considering the economic condition, increase in fraudulent activities, change in the prime minister and fall in share prices/buybacks – The company is in a vulnerable position and must make effective use of its strategies to overcome the same. I wonder if there are any downsides to their strategy of acquisition and expansion. Great read!
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Great coverage on how Lloyds is going to handle Brexit, but in your opinion, do you think they could successfully be dominant in the EU?
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The sector which you have choosen is very much affected due to brexit . Banking sectors will be completely changed or not what’s your opinion or prediction?
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Hi, great job on your blog, it was quite an interesting read.
I do agree to your view of Lloyds’ bank approach to Brexit and would like to know what aside from cyber crimes what will he bank face in the occurrence to hard Brexit and how can Lloyds overcome employee’s resistance to change?
Thanks,
Nárcia
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Good to know how a great bank such as Lloyds is planning to tackle a potential no-deal brexit. Great article. Keep it up!
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