Sunny

Sunny

max temp: 23°C

min temp: 15°C

ESTD 1874 Search

Banking: ‘Big Four’ lenders face competition investigation

09:51 18 July 2014

The Competition and Markets Authority (CMA) says customers have not seen enough benefit from efforts to open up the  banking market.

The Competition and Markets Authority (CMA) says customers have not seen enough benefit from efforts to open up the banking market.

Britain’s major lenders are facing a full-scale competition probe over personal accounts and small business banking.

shares

Britain’s major lenders are facing a full-scale competition probe over personal accounts and small business banking.

The Competition and Markets Authority (CMA) said today that customers had not seen enough benefit from efforts to open up the market.

It said it was minded to launch a full-scale market investigation but has given the “big four” banks Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland the chance to come up with their own solutions before a formal decision in the autumn.

The CMA said it had found that “essential parts of the UK retail banking sector lack effective competition and do not meet the needs of personal consumers or small and medium-sized enterprises (SMEs)”.

It follows two studies in collaboration with City watchdog the Financial Conduct Authority (FCA) into the £8 billion personal current account market and the £2 billion SME current account and lending sector.

The CMA found that concerns remained about competition not effectively serving customers despite measures to make authorising new banks simpler and faster, to make account switching easier and to improve transparency.

It found that it was still too hard for newer and smaller banks to enter the market or expand, with much business remained concentrated in the hands of a few.

There was “very little movement” in the market share of the largest banks - other than as a result of mergers and acquisitions - and many customers saw little difference between the largest banks in the services they offered, the CMA said.

It added that levels of shopping around and switching between banks remained low and that very limited gains had been made by those with the highest levels of customer satisfaction.

This was “not what would normally be expected in well-functioning, competitive markets”, the CMA said.

The watchdog also said it was hard for customers to make comparisons between lenders, particularly on complex overdraft charges, limiting banks’ incentives to compete, and possibly resulting in higher overdraft charges.

Meanwhile, the extent to which the firms used “cross-subsidy” between different retail banking products and different customer groups using “free-if-in-credit” accounts may also “distort competition”.

CMA chief executive Alex Chisholm said: “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.

“Our provisional view is that a full market investigation by an independent expert CMA group is necessary to look at this market in detail and identify appropriate measures if competition concerns are found.

“However we very much welcome views, which we will carefully consider, before taking a final decision.”

Business Secretary Vince Cable said: “My long-standing concerns about the state of competition in UK banking are well documented, so I welcome the CMA’s announcement today.

“This is an issue that really matters for the real economy - constraints on banking competition mean less choice for both consumers and small businesses seeking finance to grow.

“This Government has already acted to improve competition, by setting up tough new regulators, establishing the British Business Bank to make the business finance market work better, and making it easier for new players to enter the market.

“But the CMA’s initial decision to conduct a full market investigation is a very significant further development, and I very much look forward to their final decision in the autumn.”

Shadow chancellor Ed Balls said: “Ed Miliband and I have repeatedly called for an inquiry into bank competition, so it’s welcome that the Competition and Markets Authority is now set to start this work later this year.

“Ministers claim there is no problem to solve, but everyone else recognises that we have a lack of competition in our banking sector.

“As we said earlier this year, in the next parliament we need to see at least two new challenger banks and a market share test to ensure the market stays competitive for the long term.”

Richard Lloyd, executive director of consumer group Which?, said: “For too long customers have been getting a raw deal from the biggest high street banks, so a full inquiry into the current account market is welcome if long overdue.

“While there have been encouraging signs of change from some banks, we need to see a revolution in customer service and much better, easily comparable products if more people are to be convinced that it’s worth switching accounts.

“The CMA must now get to the bottom of why this market is not working for consumers, but the banks should not waste any time in making changes to put the interests of their customers first.”

shares

0 comments

Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files
Comments

Please log in to leave a comment and share your views with other East Anglian Daily Times visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by East Anglian Daily Times staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique East Anglian Daily Times account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

Dame Fiona Kendrick:, chief executive of Nestlé  UK & Ireland

Food giant Nestlé has announced plans to close its defined benefit pension scheme, sparking the threat of industrial action.

The Treasury has sold another 1% stake in Lloyds Banking Group.

The taxpayers’ stake in Lloyds Banking Group has fallen to below 16% after the Government sold off another tranche of shares.

The installation of solar panels on the roof of Precision Marketing Group's premises in Lamdin Road, Bury St Edmunds

A Suffolk-based firm will be among the organisations taking part in a nation-wide celebration of solar energy tomorrow.

Candy Gaga'’s Wanda Hewell, right, and daughter, Cherish.

Tower Ramparts in Ipswich now has its very own castle – thanks to the success of a local sweet shop business.

Stansted Airport

A report into the future of Britain’s airports does not rule out a second runway at Stansted – and raises fears of extra night flights to the Essex airport.

Growth in manufacturing eased last month  to its slowest level in two years.

Britain’s manufacturing sector grew at its slowest pace in more than two years last month, impacted by subdued demand from Europe.

Speedy Hire
 has warned that its results for this year will come in

Tool rental business Speedy Hire saw nearly a third of its stock market value wiped off after it announced the shock departure of its chief executive and warned over a major blow to full year profits.

Greene King chief executive Rooney Anand.

Pubs and brewing group Greene King today posted another year of record revenues, with sales within its key Retail division topping £1billion for the first time.

Suffolk Coastal considers convenience store bid

Planning chiefs have responded to concerns about noise and antisocial behaviour arising from proposals for a new convenience store in Kesgrave by insisting on closing times being brought forward an hour and the installation of a barrier to restrict overnight parking.

Tim Dunford, managing director and master brewer at the Green Jack Brewery, third from left, with Beer for Summer judges Mark Dorber, left, and Charlie McVeigh of The Draft House, right, and Peter Gordon, on trade director of Budweiser Budvar.

A Suffolk brewing company is celebrating after winning a new national “Beer for Summer” competition.

Most read

Most commented

Topic pages