BRITAIN’s biggest banks have been spared a full-blown inquiry into the personal current account market.
The Office of Fair Trading has decided not to refer the industry to the Competition Commission, as it highlighted new rules which are being implemented to make it easier for customers to switch accounts.
However, the consumer rights organisation Which? said that current account providers had been “let off the hook” and more competition was needed.
Britain’s “Big Four” lenders – Lloyds, RBS, Barclays and HSBC – control about three-quarters of the current account market, worth about £9bn per year, and MPs want more competition.
The OFT said it still had significant concerns about the market, and would consider again whether there were grounds for a competition inquiry in 2015 at the latest. However, it noted that there had been a significant reduction in overdraft charges since a previous study in 2008.
To avoid a new inquiry, the OFT wants banks to be more customer-focused, and for customers to be better informed and to have a greater choice of banks to choose from. The OFT also wants it to be easier for new banks to enter the industry.
A committee of MPs, who have been given the job of recommending measures to improve banking standards, is expected to put competition at the heart of its proposal when it publishes its final report next month.
In September, new measures will be introduced giving banks a strict seven-day deadline to enable customers to move to a rival bank should they wish to do so. Customers have traditionally been reluctant to move because of the complications involved.
On top of this, start-up banks in Britain will not need as much capital as their established rivals from next April.
Competition will also be increased through the creation of two new banks as a result of the branch sales which state-backed RBS and Lloyds must make, as a condition of European regulators granting approval for their taxpayer-funded bailouts in 2008.
Lloyds is preparing a stock market listing of 630 branches, which will be rebranded under the TSB banner, which was last seen on the British high street in the early 1990s.
RBS has similar plans for 312 branches, which will be renamed Williams & Glyn’s, a name not seen since the 1980s, prior to a stock market flotation next year.
Many Britons became disillusioned with their banks in the aftermath of the 2008 financial crisis and mistrust of the industry heightened following scandals such as the rigging of benchmark interest rates and the mis-selling of loan insurance.
Metro Bank became the first new high street lender for more than a century when it launched in 2010. Other challengers such as Virgin Money and retailer Marks & Spencer have also emerged.
However, Which? executive director, Richard Lloyd, said: “It’s disappointing that current account providers have been let off the hook when the Office of Fair Trading found such damning evidence of people being let down by the banks.
“Further action by the competition authorities still looks inevitable.
“The changes underway in retail banking are simply not enough to transform shoddy customer service or prevent banks charging unfair fees. Everyone agrees that a big change is needed in banking.
“The recent collapse of the sale of Lloyds’ branches to the Co-op was a further setback to the Government’s efforts to tackle the unhealthy dominance of our biggest banks.
“Greater competition is urgently needed on the high street to make the banks work for customers, not bankers.”