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| ‘Crunch time’ for Britain’s big four banks as competition inquiry launched | ‘Crunch time’ for Britain’s big four banks as competition inquiry launched |
| (35 minutes later) | |
| Britain’s major banks are to be subjected to an 18-month investigation into how they treat their small business and personal customers in a move welcomed by consumer bodies and the new entrants trying to break the stranglehold of the “big four”. | Britain’s major banks are to be subjected to an 18-month investigation into how they treat their small business and personal customers in a move welcomed by consumer bodies and the new entrants trying to break the stranglehold of the “big four”. |
| Alex Chisholm, the head of the Competition and Markets Authority (CMA), is to embark on the most detailed analysis of the sector for a decade after concluding that customers are not getting a good enough deal from the major high street players. Major banks could be broken up or forced to be more transparent about their fee structures and a previous deal over the treatment of small business customers – in operation since 2002 – is also to be reviewed. | Alex Chisholm, the head of the Competition and Markets Authority (CMA), is to embark on the most detailed analysis of the sector for a decade after concluding that customers are not getting a good enough deal from the major high street players. Major banks could be broken up or forced to be more transparent about their fee structures and a previous deal over the treatment of small business customers – in operation since 2002 – is also to be reviewed. |
| According to the CMA the big four – Barclays, HSBC and bailed-out Lloyds Banking Group and Royal Bank of Scotland – have a 77% share of personal current accounts and an 85% share of small business banking, market shares that have barely shifted despite almost a dozen investigations in the past 15 years. | |
| His investigation into the two areas, which generate £10bn a year in revenue for the banking sector, will not be concluded until after the general election in May 2015 although an interim report is scheduled for the summer. | |
| Small business leaders said it was a “unique opportunity” to force through change and the consumer body Which? said it was “crunch time” for the banks. | Small business leaders said it was a “unique opportunity” to force through change and the consumer body Which? said it was “crunch time” for the banks. |
| Chisholm had signalled his intention to launch the investigation in July but conducted a two-month consultation until mid September before reaching the conclusion that a full-blown investigation was needed. | Chisholm had signalled his intention to launch the investigation in July but conducted a two-month consultation until mid September before reaching the conclusion that a full-blown investigation was needed. |
| “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,” he said. | “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,” he said. |
| “Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy,” he added. | “Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy,” he added. |
| The big players had tried to convince Chisholm that they were serious about embarking on initiatives to make it easier for customers to compare accounts by setting up a comparison website and setting standards to make it easier for small business customers to switch between banks. | The big players had tried to convince Chisholm that they were serious about embarking on initiatives to make it easier for customers to compare accounts by setting up a comparison website and setting standards to make it easier for small business customers to switch between banks. |
| But, Chisholm said, he was still concerned about a number of areas such as the low levels of customers shopping around and switching, the difficulties customers faced in making comparisons and complex overdraft charges which left some customers with fees of £400 a year. | |
| The CMA said there were also barriers to entry for would-be challengers – despite attempts by the government to make it easier. Chisholm also said branch networks remained important – even though banks are axing their high street presences as customers increasingly use digital and online methods for their basic banking needs. | The CMA said there were also barriers to entry for would-be challengers – despite attempts by the government to make it easier. Chisholm also said branch networks remained important – even though banks are axing their high street presences as customers increasingly use digital and online methods for their basic banking needs. |
| Lloyds and RBS are already being forced to carve out branch networks – TSB and Williams & Glyn respectively – to comply with the terms stipulated by the EU at the time of their taxpayer bailouts, which are intended to create new “challenger banks”. | Lloyds and RBS are already being forced to carve out branch networks – TSB and Williams & Glyn respectively – to comply with the terms stipulated by the EU at the time of their taxpayer bailouts, which are intended to create new “challenger banks”. |
| “Customers have been crying out for a root-and-branch investigation like this for years,” said Paul Pester, the boss of TSB, in which Lloyds still has a stake. “The big four banks have had a stranglehold on the market for too long.” | “Customers have been crying out for a root-and-branch investigation like this for years,” said Paul Pester, the boss of TSB, in which Lloyds still has a stake. “The big four banks have had a stranglehold on the market for too long.” |