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  4. Retail banking to get in-depth competition probe

Retail banking to get in-depth competition probe

7th November 2014 | consumer

An in-depth market investigation into the personal current account and SME retail banking sectors is to be undertaken by the Competition & Markets Authority.

Confirming its provisional decision of 18 July, the CMA said the investigation would be conducted by a market reference group drawn from its panel of independent members.

The 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.

Members 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.

A consultation following the July announcement revealed that most respondents agreed that there should be a market investigation. The CMA continues to have concerns about the effectiveness of competition in the personal and SME sectors, which 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; and
  • 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.

The CMA will also conduct a review of the competition undertakings put in place following the Competition Commission’s report in 2002 into SME banking, in order to examine whether any change of circumstances since then warrant their being varied or terminated. This review will be conducted alongside the market investigation by a group composed of the same panel members.

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."

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