RBS Royal Bank of Scotland Group PLC

The U.K.'s antitrust regulator on Thursday said Britain's retail banking market isn't competitive enough, but held back from forcing the country's big lenders from making any radical changes to their businesses.

The Competition and Markets Authority published the preliminary findings of its probe into consumer checking accounts and banking services to small businesses, an investigation some feared may lead to the breakup of the country's biggest banks.

In its interim findings the CMA said that too few customers are switching accounts and that banks "do not have strong enough incentives to work hard to compete for customers through better products or cheaper prices." The CMA said banks should focus on helping and encouraging customers to switch accounts. The antitrust authority also held back from ending free-in-credit banking saying that it saw no evidence that it distorted competition. Instead it said that banks should implement various price comparison tools so that customers are aware how much they are paying for their banking products.

The CMA will now discuss its findings and any possible remedies ahead of publishing its final report in May 2016.

U.K retail and business banking is dominated by four banks: Lloyds Banking Group PLC, Royal Bank of Scotland Group PLC, Barclays PLC and HSBC Holdings PLC. Last year they held approximately 70% of personal current accounts and 80% of business accounts in the U.K., the CMA said.

The outcome of the probe is a success for incumbent banks who have argued that the rise online competitors and newly founded challenger banks is already rendering the market more competitive.

The CMA pointed to a number of potential changes to the £ 16 billion personal and small business account market. The CMA suggested customers receive prompts to change banks, caused by certain "triggers," such an IT failure or a major complaint. It also said banks and payments operators should do more to promote the country's current account switching system.

The CMA is also keen for customers to get a better idea of how much they are paying for their banking services. It suggested that banks make it easier to format customer data so it can be plugged into price comparison websites or shared with competitors.

It also called for more transparency on the charges banks impose on customers.

Write to Max Colchester at max.colchester@wsj.com

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(END) Dow Jones Newswires

October 22, 2015 03:55 ET (07:55 GMT)

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