Investigation into dominance of ‘big four’ banks to be launched

HSBC has been criticised for its treatment of small businesses
HSBC has been criticised for its treatment of small businesses
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A MAJOR investigation into the dominance of Britain’s big four banks over the multi-billion pound industry for accounts of consumers and small businesses is expected to be announced today.

The Competition and Markets Authority (CMA) will confirm whether it has decided to press ahead with an inquiry into personal current accounts and small and medium-sized enterprise (SME) banking.

It has previously said that it is minded to launch a full-scale investigation, but it has given the “big four” – Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland (RBS) – the opportunity to come up with their own solutions. But James Daley, managing director of the Fairer Finance consumer group, said he feared a long delay while a report was carried out.

He said: “It is probably going to be another long inquiry. Most consumers could tell you there are problems in the sector and having another lengthy inquiry will delay decisive action.”

He said nine per cent of mobile phone customers change suppliers each year compared to just 1.5 per cent of bank customers, which is a sign that competition was not working.

Previous studies by the CMA have found that essential parts of the retail banking sector “lack effective competition and do not meet the needs of personal consumers or SMEs”.

The CMA has been consulting on a provisional decision that there should be an in-depth investigation into the current account market, which generates revenues of more than £8bn, and SME banking, including the more than £2bn business current account market and business loans.

Some 65 million personal current accounts exist in the UK, while there are 3.5 million business current accounts. The big four banks collectively supply more than three-quarters of the personal current account market in the UK, and the CMA has previously found that despite moves to make it easier to switch banks, the number of people who actually do so remains low.

The big four also account for more than 85 per cent of business current accounts and 90 per cent of business loans. The CMA has said that SME switching levels remain low, with just four per cent changing their bank every year.

The CMA has been inviting views on proposals to remedy problems in the SME banking sector which have been put forward by Barclays, HSBC, Lloyds and RBS as a possible alternative to a market investigation reference being made.

These proposals would involve the banks giving undertakings to set up a comparison website to improve transparency as well as establishing new standards around account opening.

The CMA said in July that while it remained open-minded, “we provisionally consider that it would be more appropriate to conduct a full investigation than to accept these proposals”.

The watchdog, which has been collaborating with the Financial Conduct Authority (FCA) to gather evidence, has not commented on what the decision to be announced today will be. But Sky News said it understood the decision to proceed with a formal investigation was approved last month.

The CMA said in July that many customers see “little difference” between banks. Some new players have also entered the market, with Marks & Spencer unveiling its first “free” current account and Tesco Bank also launching its first current account.