The Competition and Markets Authority is to launch an investigation into the big five banks.
Christopher Woolard, director of policy, risk and research at the FCA, said: “Whilst there have been some recent improvements, for small businesses, competition in the banking system isn’t working as it should. The market is still concentrated, switching between providers is low and those running small businesses don’t believe there is much differentiation in terms of the products on offer and the standard of service they receive.
“Small businesses are the lifeblood of the British economy, employing more than half of those in work in the private sector, which is why it is vital that they have access to a banking market that works for them.”
Separately, the CMA has today updated the Office of Fair Trading’s 2013 review of the personal current account market. Whilst this work was not carried out jointly, the FCA provided input into the CMA’s report and we welcome the CMA’s efforts to identify and address continued competition concerns in the personal current account market.
As the CMA consults on its provisional decision on a market investigation reference, the FCA and the CMA will maintain their collaborative approach. This collaboration will also extend to the newly established Payment Systems Regulator, given the links between payment systems and competition in retail banking.
In line with its objectives, the FCA has already taken some steps to promote effective competition in the interests of consumers; first, by reducing the regulatory barriers faced by new bank applicants, who may provide more competition. In addition, the FCA has started a programme of work to promote competition and innovation by making it easier for start-ups and established businesses to bring innovative ideas into financial services markets.
The FCA has also been conducting a market study into the cash savings market, and recently published the interim findings.
As it develops its competition work more generally, the FCA will take account of small businesses as a distinct sub-set of consumers and will look at ways of improving their understanding of potential detriment and awareness of sources of financial advice.
Charlotte Webster, campaign manager for Move Your Money, said: “We welcome the CMA’s decision to investigate the banking market. We’ve been saying this for years. Simply, people want real alternatives. This is something the big banks would have you believe don’t exist, but they do.
“Whilst millions have switched banks in the last year, there are many parallels between energy and banking. We should be seeing a switch from the big five to the big 500. In the meantime, the full range of banking providers can be found on our Ethical Banking Scorecard.”