The market for current accounts and small business banking is set to be shaken by a Competition and Markets Authority probe investigating a lack of competition against the “big four” high street names.
The probe, first proposed in July, will also investigate the difficulties customers face in switching banks, as well as lending to small and medium-sized businesses.
The British Banking Association said the industry would “co-operate fully with the investigation”, but several larger banks felt the probe was not necessary.
In a submission to the CMA, Barclays said that the probe was badly timed, and that new developments in the banking industry must be given time to mature before any judgement is made.
Lloyds Banking Group said that it did “not consider that such a reference is necessary”, with HSBC adding that the CMA had previously “taken a backward looking view” of both current accounts and small business lending.
But smaller players feel the time is ripe for the stranglehold of the ‘big four’ to be challenged in a bid to encourage innovation and add more competitive products to the market.
“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,” said Craig Donaldson, chief executive of Metro bank.
“For many years Britain’s dysfunctional banking sector has struggled to meet the needs of [small and medium enterprises], impeding the growth prospects of some of our most promising young companies,” said business group the British Chambers of Commerce.
After carrying out a three month review with members of the public, banks and other industry bodies, the CMA identified major problems with the UK’s banking sector.
Barclays, HSBC, Lloyds and RBS collectively supply more than three-quarters (77 per cent) 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.
Customers also encounter a lack of transparency and have difficulties when comparing services from different banks
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 4 per cent changing their bank every year.