CMA to investigate retail banking
A full investigation into the UK's retail banking sector has been launched amid concerns that a lack of competition in the market is leaving consumers worse off.
The Competition and Markets Authority (CMA) said its inquiry would focus on the dominance of the major four high street banks.
It will also investigate banks' lending to small and medium sized businesses. The UK's four major banks, RBS, Lloyds, Barclays and HSBC, control about 85% of small and medium business accounts and around 75% of all current accounts.
The CMA, which first proposed the investigation in July, said it was concerned over the "low" levels of customers shopping around for banking services, that there was very little transparency in the sector as a whole, and that "continuing barriers" were preventing smaller providers from expanding their business.
Alex Chisholm, CMA chief executive, said: "Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.
"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, conducted by a Market Reference Group drawn from the CMA's expert panel of independent CMA members.
The inquiry, which will take around 18 months to complete, has been welcomed by challenger banks looking to end the dominance of the big four.
Craig Donaldson, CEO of Metro Bank said: "We support the CMA's decision to launch an investigation into personal current accounts and SME banking.
"The CMA's assessment identifies a serious competitive issue in the market and this is something with which we strongly agree; competition in the UK banking sector is heavily distorted. No market where such a small number of players hold such a large percentage of the market share should be described as efficient or competitive.
"We need a level playing field in banking, where all banks can compete in a transparent and innovative market. Without a level playing field, innovation and competition are stifled, and consumer choice will continue to be limited. We applaud the CMA for recognising this, and look forward to assisting them with their investigations."
Paul Pester, CEO of TSB Bank, added: "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 have had a stranglehold on the market for far too banking along with more choice and competition, so consumers get a better deal."