The CMA has concerns about the effectiveness of competition in the aforementioned sectors, after consideration of consultation responds.
The concerns include:
• low levels of customers shopping around and switching
• limited transparency, and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts
• continuing barriers to entry and expansion into the sector, limiting the ability of smaller and newer providers to develop their businesses
• very little movement over time in the market shares of the four largest banks, which provide over three-quarters of personal and business current accounts
Commenting on the announcement, 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.
“After carefully considering the consultation responses, most of which supported a market investigation, we remain of the view that there should be a full market investigation into the sector, conducted by a Market Reference Group drawn from the CMA’s expert panel of independent CMA members. 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.
“The group will be appointed shortly and will publish a timetable for the various stages of the investigation and develop and consult on an issues statement, which will set out the investigation’s proposed focus.”
In addition, the CMA is also looking at investigating small and medium sized enterprise (SME) banking, especially the competition that prevails following the Competition Commission’s (CC) report in 2002, and whether any changes in the sector have occurred since then that require any variation or termination.
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