The UK Competition and Markets Authority (CMA) has launched an investigation into the retail banking services that are available to SMEs and consumers.
In a statement, the CMA said that it has “concerns about the effectiveness of competition in these sectors”. Its concerns specifically relate to customers not shopping around for bank accounts and finding it hard to make comparisons between banks.
It also highlighted the “continuing barriers to entry and expansion into the sector”, which limits the ability of smaller and newer providers to develop their businesses. And it highlighted that there had been very little movement over time in the market shares of the four largest banks: Barclays, Lloyds, HSBC and Royal Bank of Scotland.
The investigation raises the possibility that the banks could be broken up by the competition regulator, which would also have implications for bigger businesses.
Commenting on the investigation, CMA chief executive Alex Chisholm said:
“Effective competition in retail banking is critically important for individual bank customers, small- and medium-sized businesses, and the wider economy.”
BBA chief executive Anthony Browne said that the banks will “cooperate fully with any investigation”. He added: “Banks are pro-competition – they compete for business every day. This summer we published a series of ideas to help new banks set up and smaller players to grow. We hope these suggestions will be taken up by regulators and politicians.”
The investigation is expected to last around 18 months.