Banks failing customers could be broken up
Major high street banks are not meeting the needs of customers and are to be investigated by the competition authorities.
The inquiry, which is expected to take 18 months, could see the UK's four major banks - Lloyds, RBS, HSBC and Barclays - broken up after an initial study found the market lacked effective competition, leaving consumers with little choice about where they do their banking.
The Competition and Market Authority (CMA) said the big four make up 77% of the current account market but only 3% of customers switch banks a year.
Research from Consumer Intelligence revealed that while 64% of customers said they didn't bother to switch banks as they were happy with their current account, 8% said there was no point in doing so as most accounts are so similar.
The CMA added that the largest banks see very little change in their share of the market and barriers remain for new and smaller banks to enter the sector, while customers see very little difference between the largest banks in terms of the services they offer.
It will now launch a consultation into its preliminary decision and invite views from the sector until September, before it makes its final decision over whether to launch a full inquiry.
Alex Chisholm, CMA chief executive, 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."
Chief executive of Metro Bank Craig Donaldson said he fully supports the CMA's decision.
"As the first new high street bank in more than 100 years, we understand the challenges that new competitors face," he said.
"While work has been done to improve this, we desperately need a level playing field that allows new entrants to come into the sector and win customers. Importantly, these new entrants should offer differentiated banking models that suit different customers' needs; giving customers a choice is the key."
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.