View from City Road: B&B ventures where others have failed

Has another British financial institution been carried away by talk of a single market in financial services? This time, the flag is carried by Bradford & Bingley, the building society, which says it is confident about its new venture in Germany. We shall see. So was Abbey National about France, until the bank-turned-building society lost a packet there last year.

NatWest has simply packed up in France. Midland and Lloyds did better in Germany when they bought merchant banks, but on the retail side few have ventured. The record of British financial institutions' European expansion is patchy, to say the least.

One reason is that deregulation of financial services, a European Commission obsession, has in practice been concentrated in the UK. Many new products and marketing skills developed here are of less use in European markets.

The French government stopped the spread of interest-paying cheque accounts when their introduction by Barclays threatened the cosy arrangements of the domestic banks. In Germany, money- market bank accounts are banned, and savings interest rates are artificially low, stifling innovation. (Bank of Scotland is offering Germans an offshore money market account in marks, from Britain, but the scope is limited.)

In Germany, what looks on paper like an open market in savings and mortgages is in practice tightly knit. B&B is pitting itself against the 20,000-strong branch network of the municipally owned German savings and mortgage banks, which are well dug into their local communities. Indeed, if there is money to be made by B&B it may be through selling insurance, not banking, since British rates are low compared with those offered by German insurance companies.

Success is possible on the Continent, as Barclays is proving with a growing network of savings banks in Spain and Portugal. But Barclays' secret is that the branches do not do anything as risky as lending.