A major inquiry into the dominance of Britain’s largest banks was launched by the Competition and Markets Authority (CMA) on Thursday in an effort to challenge their monopoly of the UK’s financial sector and boost competitiveness on the high street.
The watchdog’s investigation focuses on concerns relating to large banks’ control of the UK’s lucrative personal current accounts and small business lending sectors.
A low level of customers taking the initiative to shop around, a lack of transparency and confusing overdraft charges that make it difficult for UK citizens to source the best deals are of particular concern to the CMA.
Other concerns, which have sparked the probe, include barriers inhibiting smaller banks from entering into and expanding within the sector — and the sizeable stagnant shares Britain’s four largest banks hold in personal and business current accounts.
At present, their collective shares amount to an overwhelming 75 percent of the total market.
Alex Chisholm, CMA Chief Executive, said effective and adequate “competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.”
He stressed the CMA firmly believes “a full market investigation into the sector” is necessary, and confirmed it would be carried out by “a Market Reference Group drawn from the CMA’s expert panel of independent CMA members.”
The group assigned to the CMA’ inquiry is yet to be announced, but is due to publish a timetable detailing various phases of the investigation in the future. The regulatory watchdog is also yet to publish the precise focus of the investigation.
Andrea Leadsom, economic secretary to the Treasury, told the Financial Times that diversifying competition in the banking sector was “a key part of the government’s long-term economic plan,” so that the needs of UK businesses and customers could be better catered for.
But Nicholas Wilson, a British finance whistleblower currently preparing a private prosecution against HSBC for its alleged role in widespread fraud, holds little hope that the CMA inquiry will reap tangible reform.
“There have been any number of attempts to clean up and improve the banking sector and no change happens. Since the crash in 2008 bank profits have increased and bonuses got bigger. Unless and until there are regulators who actually regulate the banks, such exercises are just window dressing,” he told RT on Thursday.
Wilson warned that “captured regulators and the mainstream media” sustain and prolong the monopoly of Britain’s largest banks in personal current accounts and SME lending sectors.
A separate review will examine the “the competition undertakings put in place following the Competition Commission’s (CC) report in 2002 into small and medium-sized enterprise (SME) banking,” the Competition and Markets Authority said on Thursday.
The review will be carried out in parallel with the CMA market investigation to examine whether a change in Britain’s financial landscape since the competition undertakings were implemented necessitates their termination or reform. The findings of the CMA’s investigation and parallel review are due to be published online.
Ed Miliband, the opposition Labour party leader, recently vowed to tackle the stronghold of Britain’s big banks by forcing them to sell some of their branches if he is elected prime minister in May 2015.
With respect to reform, Wilson said the state’s largest banks “should all be broken up and there should be one, fully leveraged national bank for everyday personal and SME banking.”
“Then, if rich people want to gamble their money with criminal private bankers, that is their concern and any repercussions are not carried by the taxpayer.”