Watchdog probes Big Four current account providers

The Big Four UK banks – Lloyds Banking Group, Barclays, Royal Bank of Scotland and HSBC – face investigation from the competition watchdog, after it found the current accounts market isn’t working properly.

The Competition and Markets Authority (CMA) is still concerned that not enough people are shopping around and switching current accounts. It also thinks it’s too difficult for customers to make comparisons between banks – especially when it comes to things like complicated overdraft charges.

The watchdog has decided to press on with its in-depth, 18-month investigation into the personal current accounts (and SME retail banking sectors), confirming its plans laid out in July. 

Can’t compete

The CMA says it’s too difficult for smaller and newer current account providers to compete with the big boys – evidenced by the fact that the market shares of the Big Four hasn’t really changed all that much over time.

Alex Chisholm, CMA Chief Executive, said: “We remain of the view that there should be a full market investigation into the sector, conducted by a Market Reference Group drawn from the CMA’s expert panel of independent CMA members. 

“The Market Reference 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.”

Neither Barclays, HSBC nor Lloyds Banking Group have particularly welcomed the news.  Barclays said the review was not necessary at this time. Lloyds Bank Group also feels the probe is unnecessary, while HSBC has previously raised concerns that the CMA is taking a “backward looking view” of the current account market.

The British Bankers Association (BBA), which represents current account providers, says all the banks will cooperate fully with the CMA’s investigation. Its Chief Executive Anthony Browne said: “Banks are pro-competition – they compete for business every day.”

Vote with your feet

Kevin Mountford, banking expert at MoneySuperMarket, said: “While the introduction of the Current Account Switch Guarantee last year helped drive an increase in the number of consumers switching current accounts, it was never going to radically change the market on its own.”

Since September last year, it’s been possible to move to a new current account provider in seven days, with all your ingoing and outgoing payments automatically redirected to make the transition as smooth as possible.

While the CMA’s investigation could lead to increased competition, there’s no sense in waiting around for things to change – says Kevin.

“Given the 18 month timescales into the enquiry, however, it is unlikely anything with change in the short term so consumers still need to encourage competition by voting with their feet to keep the momentum going. 

“Encouraging more competition within financial services will ultimately herald a better deal for consumers. The more choice there is, the easier it should be for people to find the right fit for their modern day banking needs.”

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