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| Version 2 | Version 3 |
|---|---|
| 'Big Five' UK banks face full CMA competition probe | 'Big Five' UK banks face full CMA competition probe |
| (35 minutes later) | |
| Markets watchdog the Competition and Markets Authority (CMA) has recommended a full competition inquiry into banks. | Markets watchdog the Competition and Markets Authority (CMA) has recommended a full competition inquiry into banks. |
| The provisional decision recommends a full-scale inquiry into the banking sector including the provision of current accounts and business lending. | The provisional decision recommends a full-scale inquiry into the banking sector including the provision of current accounts and business lending. |
| The biggest four High Street banks provide 77% of current accounts and with Santander dominate the market. | |
| The process will start with a consultation with the banking industry that will last until the 17 September. | The process will start with a consultation with the banking industry that will last until the 17 September. |
| Alex Chisholm, CMA chief executive, told BBC Radio 4's Today programme it was "vital" that the banking sector worked properly, which was why the full eighteen month investigation was being proposed. | Alex Chisholm, CMA chief executive, told BBC Radio 4's Today programme it was "vital" that the banking sector worked properly, which was why the full eighteen month investigation was being proposed. |
| "Retail banking is worth a lot of money to the banks - £10bn a year - but also every customer in the country has an account, almost every business and every household," he said. | "Retail banking is worth a lot of money to the banks - £10bn a year - but also every customer in the country has an account, almost every business and every household," he said. |
| "At the moment they [the banks] don't seem to be doing a good job of satisfying their customers, there are a lot of under-satisfied customers out there, small businesses are saying they are not happy with the choices they face and the services they are getting, and in the personal market as well, the big [five] banks, the satisfaction rating is below 60%," he added. | "At the moment they [the banks] don't seem to be doing a good job of satisfying their customers, there are a lot of under-satisfied customers out there, small businesses are saying they are not happy with the choices they face and the services they are getting, and in the personal market as well, the big [five] banks, the satisfaction rating is below 60%," he added. |
| "We are suggesting there's not enough rivalry there to be really falling over themselves to serve the customer, [to] come up with new innovations and come up with the best value and best service they can provide," Mr Chisholm argued. | "We are suggesting there's not enough rivalry there to be really falling over themselves to serve the customer, [to] come up with new innovations and come up with the best value and best service they can provide," Mr Chisholm argued. |
| The main problems | The main problems |
| The CMA said many customers saw little difference between the largest banks in terms of the services they offer. | The CMA said many customers saw little difference between the largest banks in terms of the services they offer. |
| Its study found that the number of consumers shopping around and switching between banks remained low. | Its study found that the number of consumers shopping around and switching between banks remained low. |
| There was limited transparency and it was difficult for customers to make comparisons between banks, the CMA added. | There was limited transparency and it was difficult for customers to make comparisons between banks, the CMA added. |
| Current account overdraft charges were found to be very complex, making it harder for bank customers to choose the cheapest or most appropriate accounts for them. | Current account overdraft charges were found to be very complex, making it harder for bank customers to choose the cheapest or most appropriate accounts for them. |
| That in turn limited the banks' incentives to compete, which the CMA said may be leading to higher overdraft charges were there greater market competition. | That in turn limited the banks' incentives to compete, which the CMA said may be leading to higher overdraft charges were there greater market competition. |
| Past probes | Past probes |
| The CMA said that despite efforts by regulators to make the banking sector more competitive - including a faster current account switching regime introduced last year - competition was not effectively serving the interests of small businesses or current account customers. | The CMA said that despite efforts by regulators to make the banking sector more competitive - including a faster current account switching regime introduced last year - competition was not effectively serving the interests of small businesses or current account customers. |
| It added that it was still difficult for newer and smaller "challenger" banks to get into the industry, particularly in Scotland and Northern Ireland. | It added that it was still difficult for newer and smaller "challenger" banks to get into the industry, particularly in Scotland and Northern Ireland. |
| The CMA pointed out there had been very little movement in the market share of the UK's biggest banks - Royal Bank of Scotland, Lloyds Banking Group, HSBC, Santander and Barclays - except through mergers and acquisitions. | The CMA pointed out there had been very little movement in the market share of the UK's biggest banks - Royal Bank of Scotland, Lloyds Banking Group, HSBC, Santander and Barclays - except through mergers and acquisitions. |
| Christopher Woolard of the Financial Conduct Authority (FCA), which has been helping the CMA, said while there had been some recent improvements for small businesses, competition in the banking system still wasn't working as it should. | Christopher Woolard of the Financial Conduct Authority (FCA), which has been helping the CMA, said while there had been some recent improvements for small businesses, competition in the banking system still wasn't working as it should. |
| "The market is still concentrated, switching between providers is low and those running small businesses don't believe there is much differentiation in terms of the products on offer and the standard of service they receive," he said. | "The market is still concentrated, switching between providers is low and those running small businesses don't believe there is much differentiation in terms of the products on offer and the standard of service they receive," he said. |
| Hugely unpopular | |
| Banking is the most widely criticised industry in the UK. | |
| The banks have been held responsible for plunging the UK into recession after the 2008 financial crisis due to their reckless lending. | |
| They faced a long running campaign a few years ago against their high overdraft charges, which saw the old Office of Fair Trading pursue an ultimately unsuccessful legal challenge against the banks that foundered in the Supreme Court. | |
| Meanwhile the banks are the subject of millions of complaints ever year from from disgruntled customers, not least because of their role in mis-selling payment protection insurance. | |
| This scandal has already cost the banking industry more than £20bn in compensation and associated administrative costs, and the figure is still growing as more victims are identified. | |
| This forthcoming probe from the CMA is the latest in a plethora of inquiries into the state of the industry going back nearly two decades: | |
| A final decision to pursue its latest enquiry will be taken by the CMA after September. |