Britain’s banks are facing an in-depth investigation to see if the most dominant lenders are stifling competition.
The Competition and Markets Authority (CMA) has launched an inquiry into the personal current account and small business retail banking sectors.
The watchdog says few customers are switching accounts, with limited transparency making it difficult to compare services.
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Small banks are also struggling to enter the market, with just four banks – Lloyds, RBS, Barclays and HSBC – dominating more than three-quarters of the 65 million personal current accounts in Britain, a market worth £8bn in total.
The 'Big Four' also control about 85 per cent of the small and medium-sized business account industry, which is worth another £2bn.
"The inquiry, which would last at least 18 months, could result in the large banks having to sell off parts of their business to carve out new challengers," says the Financial Times.
Alex Chisholm, CMA’s chief executive, says effective competition in retail banking is "critically important" for individual bank customers, small and medium-sized businesses and the wider economy.
Paul Pester, chief executive of TSB Bank, said the 'Big Four' have had a "stranglehold on the market for far too long" and that consumers had been "crying out" for such an investigation.
However, in their submissions to an initial CMA consultation, Barclays said it felt the review was "not appropriate at this time" and HSBC said it was "concerned" that the CMA was taking a "backward-looking view". Lloyds Bank, which is still partly owned by the taxpayer, also said it did think the investigation was "necessary".
Nevertheless, the BBA, which represents the banking sector, told the BBC the industry would "co-operate fully with any investigation".
The CMA has previously suggested that a banking comparison website with clear information on fees would help customers find the best deal and increase competition.
