UK banks face competition probe
18 July 2014 | 4025 views | 3
Britain's competition watchdog is preparing an in-depth investigation into the retail banking sector in a move which could eventually see the country's high street giants broken up.
The Competition and Markets Authority (CMA) has made a provisional decision to go ahead with a full-scale, 18-month long inquiry into the industry, although it will first carry out a consultation before making a final call in the autumn.
The move comes after two CMA studies which found that the £8 billion personal current account market and the £2 billion SME banking market suffer from a lack of competition.
Despite the arrival of new players such as Tesco Bank, Virgin, Metro Bank and TSB, the four big boys - Barclays, HSBC, Lloyds and RBS - still control 77% of the personal current account market and 85% of the business current accounts.
The arrival last year of a current account switching service has failed to make a significant change to the number of people moving providers, says the CMA. With many customers seeing little difference between the services on offer, just three per cent switch each year despite satisfaction levels with the big four floundering below 60%.
The watchdog has also flagged a lack of transparency, making it difficult for customers to compare providers. The government is currently working with banks to address this by letting Brits download all of their current account data and feed it into online tools that help them pick the best banking provider.
But despite the industry initiatives to make account switching easier and boost transparency, the CMA is eager to push ahead with a full investigation which could see it recommend that the high street giants divest parts of their businesses.
Alex Chisholm, chief executive, CMA, says: "Competitive personal and SME banking markets are essential to households and businesses throughout the country, and to the success of the UK economy.
"However, our studies have found that despite some positive developments, significant competition concerns remain which mean that customers may not be getting consistently good service and value from their banks."
British Banking Authority chief Anthony Browne insists that "substantial changes" are already underway to boost competition but that banks would cooperate fully with any investigation.