News Column

Banks braced for competition investigation

July 18, 2014

Jill Treanor

Britain's banks are braced for an inquiry into competition on the high street to be signalled today when the competition watchdog reports on its latest views on the industry dominated by big four players.

Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC have an 80% share of the market for current accounts and small business banking, two areas that have been subjected to recent reviews by the competition authorities.

The Competition and Markets Authority, the new competition watchdog, will report back on those and is expected to launch a consultation through the summer that could herald a full-blown investigation in the autumn.

The government has also been focusing on increasing competition in the sector by relaxing rules to make it easier for new banks to be set up. The business secretary, Vince Cable, is also keeping up the pressure on RBS to speed up the process of creating a new challenger bank for small business customers by spinning out 314 of its branches under a new brand.

Cable last night called on RBS to accelerate the reintroduction of the Williams & Glyn name - a brand last seen 30 years ago - on the high-street branches which the EU ordered it to sell at the time of its 2008 taxpayer bailout. But the fascia is yet to appear above any of the branches in question. In contrast, Lloyds Banking Group has resurrected the TSB name for the 631 branches it was forced to spin off and has started the process of a stock-market flotation.

Cable's latest intervention, in a letter to the RBS boss, Ross McEwan, came before the announcement by the CMA and amid heightened political scrutiny of banks. It is expected to signal the 10th competition investigation in the sector in 15 years.

The largest market shares are held by the two bailed-out banks. Last year the Office of Fair Trading, a predecessor to the CMA, concluded the number of branches they were spinning off did not need to be increased to enhance competition.

The revival of W&G aims to create more competition in the small and medium-sized (SME) business sector, which Cable is keen to see. In his letter, the business secretary told McEwan: "Williams and Glyn has the potential to be an important challenger in the small business market in particular and therefore many, including me, are anxious to see it in operation as soon as possible."

The banking industry has been facing the possibility of a competition investigation since 2011, when Sir John Vickers' independent commission on banking recommended one take place in 2015. Vickers also recommended the creation of a switching service for current accounts. The service began in September last year and bankers hope it will stall any investigation into personal current accounts.

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Source: Guardian (UK)

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