CMA Seeks to Boost Competition Between Retail Banks--Update
May 17 2016 - 6:18AM
Dow Jones News
By Margot Patrick
LONDON--Britain's competition regulator on Tuesday squashed any
hopes that the country's large banks might be broken up, with the
sector set for only minimal changes after a two-year review.
In a largely expected outcome, the Competition and Markets
Authority said fees on overdrawn accounts should be capped, and
banks should take it easier for customers to take their business
elsewhere. The package of proposals could save consumers GBP1
billion ($1.44 billion) over the next five years, it said.
The antitrust regulator didn't make any radical proposals for a
sector largely controlled by five lenders--Barclays PLC, HSBC
Holdings PLC, Royal Bank of Scotland Group PLC, Lloyds Banking
Group PLC and Santander UK. It said that breaking up banks "would
not address the fundamental competition problems."
Some politicians and consumer groups had hoped that start-up and
smaller banks would be given a leg up by the CMA when the review
started in 2014. The U.K. government has been trying to foster
greater banking competition since the financial crisis. But few
inroads have been made into the sector's concentrated market share
in checking accounts, mortgages and small business lending.
"Having more and smaller banks, which customers still couldn't
easily choose between because of lack of transparency on fees and
charges, would not significantly improve the market or give
customers a better deal," the CMA said Tuesday.
It said banking charges need to be simpler and more transparent,
tying in with a move globally by regulators to harness retail
banking fees. In the U.S., the Consumer Financial Protection Bureau
has been tightening rules around charges at retail banks and payday
lenders and is expected to set new rules on checking account
overdrafts later this year.
In the U.K., unarranged overdraft charges make banks around
GBP1.2 billion in annual revenue, the CMA said.
The CMA said it would keep its hands off Britain's popular,
"free in credit" checking accounts, where customers typically don't
pay fees as long as they have money in their accounts. Lost
interest on higher-return accounts means they're not really free,
but "they do work well for many customers," the CMA said.
It said better online comparison tools would make it easier for
customers to switch banks, and that small businesses could benefit
from more transparent pricing around lending.
Analysts said the measures would limit banks's profits on retail
fees but didn't hold any big surprises. So-called challenger banks
said they were disappointed.
"Today's report falls a long way short of introducing the
radical reforms the banking industry needs," said Paul Pester,
chief executive officer at TSB Bank PLC, a bank spun out of Lloyds
Banking Group after its government bailout. "The CMA has missed a
golden opportunity and is on its way to short-changing millions of
Brits by failing to go far enough in its measures to break the
stranglehold of the 'Big Five'," he said.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
May 17, 2016 06:03 ET (10:03 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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