Banks Warned to Step Up Changes By OFT Mark Atherton
The head of the Office of Fair Trading (OFT) Mark Atherton today warned Britain’s banks that they could be broken up if they did not produce a rapid “step change” in competition.
John Fingleton said the existing structure of banking did not help promote competition, with the largest four UK banks having 77 per cent of personal accounts and 85 per cent of small business accounts. This lack of competition made it harder for those banks who offer better deals to increase their market share.
One of the biggest and most persistent problems which had to be tackled was the difficulty of switching bank accounts. This was flagged up last year by the Independent Commission on Banking (ICB), which proposed several remedies. These included a requirement that banks transfer an account within seven days and provide a ‘seamless redirection’ of direct debits and credits at no cost.
Mr Fingleton said: “It is not enough to make it easy to switch. Customers also need the right prompts to exercise their choice of provider. “In banking markets consumers frequently face difficulties in understanding the true cost of running their account and comparing deals from alternative providers.”
He added that there were some new players in the market, such as Virgin Money, Metro Bank and Tesco but said for real change to occur a radical approach had to be considered. He said: “A step change is needed in the banking sector. We need to see evidence that the market dynamics of entry and switching are sufficient to drive stronger customer-focused competition. Without this the obvious question is whether the concentrated market structure of UK banking is the problem. And one way to consider this question is a reference to the Competition Commission.”