Your IndustryAug 7 2014

CMA consults on improving UK retail banking

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The Competition Markets Authority is consulting on improving competitions among UK retail banking sectors to meet the needs of small- and medium-sized enterprises.

Two studies conducted by the CMA stated that essential parts of UK retail banking lack effective competition.

The study found that the largest four providers account for more than 85 per cent of business current accounts and 90 per cent of business loans.

However, the satisfaction levels of SMEs with the ‘big four’ banks are just over a half, with fewer than a third of SMEs shopping around regularly for business current accounts and loan products. John Allan, national chairman of the Federation of Small Businesses said: “Many SMEs find it hard to differentiate between banks, and are unable to shop around to find the lenders best suited to their needs due to limited information.

“We encouraged banks to promote the BBI bank quality comparison website and to publish more data to help customers compare products with confidence.”

The CMA and FCA have carefully considered a wide range of recent regulatory initiatives and other developments designed to improve competition. These include initiatives to make the authorisation regime for new banks simpler and faster, to make switching easier and also to improve transparency.

However, despite these developments, and evidence of new entry, the market studies have identified a number of common concerns, together with evidence that competition is not effectively serving the interests of SMEs.

Some of the common concerns include very little movement in the market share of the largest banks, and many customers seeing little difference between the largest banks in terms of the services they offer.

Furthermore, levels of shopping around and switching between banks remain low, with customers unable to choose the cheapest or most appropriate accounts for them.

Alex Chisholm, CMA chief executive, said: “Competitive personal and SME banking markets are essential to households and businesses throughout the country, and to the success of the UK economy.

“However, our studies have found that despite some positive developments, significant competition concerns remain, which mean that customers may not be getting consistently good service and value from their banks.”

Mr Chisholm added: “Our provisional view is that a full market investigation by an independent, expert CMA group is necessary to look at this market in detail and identify appropriate measures if competition concerns are found.

“However we very much welcome views, which we will carefully consider, before taking a final decision.”

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