Competition probe for SME banking
THE Competition and Markets Authority (CMA) is to push ahead with a full investigation into current account and SME banking.
It launched a consultation in July and said today most respondents had “agreed that there should be a market investigation”.
The regulator said its main concerns were: low levels of customers shopping around and switching; limited transparency and difficulties for customers in making comparisons between banks; barriers to entry to the sector; and little movement over time in the market shares of the four largest banks.
CMA chief executive Alex Chisholm said: “Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.
“After carefully considering the consultation responses, most of which supported a market investigation, 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.”
The CMA will also carry out a review of undertakings put in place following a 2002 review by its predecessor, the Competition Commission, into SME banking.
Lawrence Tomlinson, a government adviser and serial entrepreneur who is chairman of Leeds-based LNT Group, said: “I’m extremely pleased with today’s decision from the Competition Market Authority to issue a Market Investigation Reference into SME banking which has received widespread support.
“I have long been a proponent of increasing competition in the banking market place as decisive action is needed to rectify the David and Goliath nature of the business/bank relationship, addressing the negative culture that has developed in these institutions. It’s time to get banks serving business again – not the other way round. This can only be achieved through the break-up of the banking oligopoly between Lloyds and RBS into six smaller, more manageable, accountable and competitive banks beyond the small divestments already planned.
“Whilst we have seen an upturn in the economy, the real economy is still not showing the growth we need for long term sustainable growth with exports continuing to struggle. Access to finance and fair banking arrangements is necessary to enable SMEs, the engine behind our economic success, to flourish.”
He added: “I very much look forward to seeing the CMA’s findings when they report on their MIR.”
