LONDON--The U.K. antitrust authority said Friday there should be
a competition probe into checking accounts and small-business
banking markets, a decision that will create further uncertainty
about the future shape and size of Britain's largest banks.
In a report, the Competition and Markets Authority said
essential parts of the U.K. retail banking sector lack effective
competition and don't meet the needs of personal consumers or small
and medium sized businesses. The competition body is now consulting
on its provisional decision that there should be an in-depth
investigation into the markets. A final decision is expected in the
autumn.
If the CMA eventually finds the British banking market lacks
competition it can recommend banks are broken up or regulations
changed.
The U.K retail and business banking is dominated by four banks:
Lloyds Banking Group PLC, Royal Bank of Scotland PLC, Barclays PLC
and HSBC Holdings PLC. These banks control 77% of the checking
account market and 90% of business loans, the CMA said.
In recent years the U.K. government has pushed for greater
competition in the U.K. banking market in the hope that a more
vibrant sector will pump more credit into the economy. So far the
efforts have yet to bear fruit. Although several smaller banks have
opened their doors in the last two years, none have the heft to
take on the so-called "Big Four."
"Our provisional view is that a full market investigation by an
independent, expert CMA group is necessary to look at this market
in detail and identify appropriate measures if competition concerns
are found," said CMA Chief Executive Alex Chisholm.
The announcement of an inquiry will put particular pressure on
Lloyds, which currently controls one in four of the U.K.'s checking
accounts.
The British Bankers Association, a bank lobby, has argued that a
review isn't needed because the sector is undergoing a
technological transformation as customers increasingly bank online.
Last year banks teamed up to create a system that allows customers
to switch checking accounts to competitors in seven days.
Meanwhile, British regulators are making it easier for companies to
apply for banking licenses.
As part of its consultation the CMA will listen to proposals by
banks on how they could increase competition in the small business
lending market. These include setting up a price comparison website
and putting in place rules that make it easier for businesses to
move their accounts between banks.
Write to Max Colchester at max.colchester@wsj.com and Razak
Musah Baba at Razak.Baba@wsj.com
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