CMA rules-out breaking-up UK’s biggest banks

The provisional findings of the CMA’s investigation, which examined the supply of personal current accounts and of banking services to small and medium-sized enterprises, had been highly anticipated after the probe was announced in November 2014.

The four largest UK banks – Barclays, HSBC, Lloyds, and Royal Bank of Scotland – in 2014 held more than 70 per cent of personal current accounts and between 80 per cent and 85 per cent of business current accounts.

Big structural changes, such as forcing the break-up of large retail banks, have been provisionally rejected, according to the CMA, which said that it was decided that such a radical step would be unlikely to address the competition concerns it has raised.

The watchdog has also provisionally decided not to bring an end to “free” if in credit current accounts. In reality, consumers do pay for these accounts, through overdraft charges and foregone interest that they could have received elsewhere.

Jayne- Anne Gadhia, chief executive of challenger bank Virgin Money, said: “We welcome the report from the CMA today but believe its provisional findings do not go far enough to transform such an important market.”

Fionn Travers-Smith, campaign manager of Move Your Money, said: “Refusing to consider breaking up Britain’s massive megabanks misses an open goal for affecting real competition in the sector, and leaves Britain vulnerable to future crises.”

The CMA investigation also found that UK current account customers could save up to £260 a year by switching to a better deal.

The CMA said banks have been able to “sit back and take their existing customers for granted”and that despite seeing some evidence that some banks with larger market shares had personal current accounts which were more expensive and/or of a lower quality, just three per cent of people switched their account in 2014.

The watchdog put forward a list of proposed remedies, including requiring banks to prompt customers to review the service they are getting at certain “trigger points” – such as when their local bank branch closes.

It provisionally rejected the idea of forcing a break-up of the banks, saying a lack of switching was the underlying problem.

The watchdog has also provisionally decided not to bring an end to “free” if in credit current accounts, consisting around 75 per cent of current accounts.

Andrew Tyrie, chairman of the Treasury Committee, said: “Free-incredit banking is a con trick and it is disappointing that the CMA have decided that it should be allowed to continue.

“It seems reasonable that millions of customers should be allowed to know how much they are being charged for having a bank account.”

Which? executive director, Richard Lloyd, said: “These proposals don’t go far enough.

“The CMA’s own evidence is that consumers are disengaged from the banking market, so better information and nudges to switch will not be enough.”

While current account customers could save themselves £70 a year by switching on average, people who heavily use their overdraft can save around £260 a year.

Yet overdraft users are often the least likely people to switch.