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Probe ordered over ‘stifling’ dominance of UK’s four largest banks

The Competition and Markets Authority (CMA) is set to begin an inquiry over fears that the dominance of the UK’s largest banks is stifling competition.

The CMA said its investigation would probe the personal current account and small business retail banking sectors, according to Sky News, despite efforts by the major banks to have to inquiry called off.

The investigation will be conducted by a Market Reference Group drawn from the Competition and Markets Authority’s (CMA) panel of independent members.

The UK’s four largest banks, Lloyds, RBS, Barclays, and HSBC collectively supply 77% of personal current accounts in the UK, a market which is worth £8 billion.

The ‘Big Four’ also control about 85% of all small and medium-sized business accounts, an industry worth another £2 billion.

The CMA said they were concerned about the low levels of customers shopping around, which they blame on the lack of transparency in the banking sector as well as barriers to expansion in the sector that prevent small and new lenders developing their businesses.

Challenger banks, such as Metro Bank and supermarket lenders, have grown their customer bases but failed to make the impact that had been hoped for to aid lending to small firms in particular.

The spin-off of TSB from Lloyds and the looming flotation of Virgin Money may also help boost competition.

Alex Chisholm, CMA chief executive, said: “Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.

“The Market Reference Group will investigate in detail and decide what action, if any, may be needed to improve competition for the benefit of personal and small business customers.”

Paul Pester, chief executive of TSB Bank, said: “The big four banks have had a stranglehold on the market for far too long.

“TSB believes the CMA investigation should focus on achieving greater transparency in banking, along with more choice and competition, so consumers get a better deal.”

Craig Donaldson, the boss of Metro Bank, said: “Competition in the UK banking sector is heavily distorted.

“No market where such a small number of players hold such a large percentage of the market share should be described as efficient or competitive.”

This was posted in Bdaily's Members' News section by Clare Burnett .