Speaking at the Beesley Lecture in London’s Pall Mall, Professor Alasdair Smith responded to criticism following a raft of proposals designed to make banks work harder for their customers.  

Among the chief criticisms of the investigation had been the CMA’s failure to break up the big banks. 

“We looked hard at this issue,” Professor Smith insisted.

The professor highlighted issues with the divestment of both TSB from Lloyds and Williams & Glyn from Royal Bank of Scotland as examples of why breaking up banks could be unnecessarily difficult.

“In any case, the fundamental problem is that when new and competitive products are introduced, it takes too long to build up customer numbers,” he added.

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“It’s best to tackle that problem directly and the remedies we are introducing will enable customers to be more responsive and reduce the advantages of the existing banks.”

Professor Smith also responded to criticisms over the CMA’s refusal to tackle banks that are ‘too big to fail’.

“The smaller banks feel that the ‘too big to fail’ banks have funding advantages in that they have to pay less for customer deposits.

“Whether or not this is so, the banking market is in the middle of the ring-fencing set in process by the Vickers report, and it would not have been sensible for us to get involved in any way.”

Meanwhile, the CMA had also come under fire for not reforming payment systems.

“The Payment Systems Regulator [PSR] was just getting underway as we were starting our work, and it was clearly in nobody’s interest that we duplicate or second-guess or supervise their work,” Professor Smith explained.

“Had the PSR been in place for five years, we might have thought of reviewing how effectively they had done their job, but they hadn’t, so we didn’t.”