© PA City of London Competition and Markets Authority says it will conduct an ‘in-depth market investigation’ into current accounts and small business lending, which could result in the break-up of biggest banksThe UK’s new competition watchdog has confirmed that it plans to launch a full investigation into banks providing current accounts and small business banking services. The annoucement comes after a study found that the dominance of the biggest lenders could be leaving consumers worse off.Alex Chisholm, the chief executive of the Competition and Markets Authority (CMA) said on Thursday that “after carefully considering the consultation responses, most of which supported a market investigation, we remain of the view that there should be a full market investigation into the sector”.
The CMA, which will appoint a panel of experts to lead the investigation, could order a break up of the UK’s four largest banks, an option favoured by Ed Miliband.
After announcing a consultation on the matter in July, the authority on Wednesday said it had several concerns about the state of the current account and SME lending markets.
In particular, it pointed to low levels of customer switching between banks, complex overdraft charges and very slow movement in the market shares of the four biggest banks.
Royal Bank of Scotland, Barclays, Lloyds and HSBC control around 75pc of the current account market, although switching levels have started to increase recently with some customers moving to one of the several so-called “challenger banks”.
Banking insiders argue that breaking up the sector would be hugely costly, and use up money that could be spent lending to the real economy.
“Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy,” Mr Chisholm said.
On Thursday, the CMA identified the following as its four major concerns:
· Low levels of customers shopping around and switching.
· Limited transparency, and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts.
· Continuing barriers to entry and expansion into the sector, limiting the ability of smaller and newer providers to develop their businesses.
· Very little movement over time in the market shares of the four largest banks, which provide over three-quarters of personal and business current accounts.
Paul Pester, the chief executive of challenger bank TSB, welcomed the announcement: “Consumers have been crying out for a root and branch investigation like this for years and we have previously said the CMA would be uniquely placed to carry out this complete review of the market.”
“The Big Four banks have had a stranglehold on the market for far too long.”
