Britain's competition watchdog is to launch a probe into some business practices by the four big retail banks. Lending to small and medium-sized firms and current accounts is not working well for customers, it says.
The Competition and Markets Authority (CMA), Britain's new competition watchdog, has said that "essential parts of the UK retail banking sector lack effective competition and do not meet the need of personal consumers or small and medium-sized (SMEs) enterprises."
It has therefore made the "preliminary decision" to launch an in-depth investigation into the way lending to SMEs and personal current accounts are being handled by Britain's big four retail banks (in UK parlance, 'high street banks'), Barclays, Royal Bank of Scotland, Lloyds and HSBC.
It would be the first joint investigation of the CMA and the Financial Conduct Authority (FCA).
The two organizations have found that small or new banks experience significant barriers to entry into the retail banking market in the UK. The watchdogs also say that switching one's account from one bank to another remains difficult. Overall, the watchdogs say transparency needs to improve.
Some changes under way
The four banks have already offered some improvements, but in a statement released on Friday, CMA chief executive Alex Chisholm insists that "despite some positive developments, significant competition concerns remain, which mean that customers may not be getting consistently good service and value from their banks."
The British Bankers' Association (BBA) said on Friday that its members were "pro-competition" and that they would cooperate fully with the investigation.
"Last month 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," BBA chief executive Anthony Brown said in a statement released on Friday.