News Column

Bank report likely to prompt competition inquiry

July 17, 2014

Jill Treanor



The new competition watchdog will release the outcome of an initial study into the banking sector tomorrow, prompting speculation about a full-blown investigation into the industry.

The Competition and Markets Authority has been conducting two studies in banking during a heightened political focus on the 80% market share of the big four - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC.

Since April the CMA has been scrutinising competition for personal current accounts and the market for small business banking. A provisional decision on whether to conduct an investigation is expected on Friday, though a final decision is not due until the autumn.

Labour leader Ed Miliband has pledged a competition investigation into the banking industry having earlier turned the political focus on the energy companies, which last month were referred to the CMA by the energy watchdog Ofgem.

The banks have already given "undertakings" about their approach to small business customers following a review of the industry in 2002. In the personal current account market, the big banks are hoping a new switching service, promising to move accounts in seven days, will demonstrate competition is improving.

The service was set up on the recommendation of Sir John Vickers through his 2011 independent commission on banking. Vickers also recommended a competition investigation in 2015.

The payments council, which is overseeing the switching service, yesterday said there had been a 16% year-on-year rise in switching with nearly 600,000 customers moving accounts.

Adrian Kamellard, chief executive of the Payments Council, said: "Competition is growing as existing providers are upping their offerings and challenger banks are competing to attract new customers."

But Richard Lloyd, of the consumer body Which?, said the switching service did not go far enough and called for the CMA to investigate. "Poor products, high complaint numbers and low switching levels show the unhealthy dominance of our big banks."


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Source: Guardian (UK)


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