LONDON (Reuters) - Britain’s biggest banks were spared a full-blown inquiry into the personal current account market after the consumer watchdog said changes already being implemented could stimulate competition in the industry.
The Office of Fair Trading decided not to refer the industry to the Competition Commission for the time being, highlighting new rules being implemented to make it easier for customers to switch accounts and branch sales by state-backed Lloyds Banking Group (LLOY.L) and RBS (RBS.L) which will create new banks.
Britain’s ‘Big 4’ lenders - Lloyds, RBS, Barclays (BARC.L), and HSBC (HSBA.L) - control about three quarters of the current account market, worth about 9 billion pounds ($13.7 billion) per year, and lawmakers are keen to encourage greater competition.
The OFT said on Wednesday it still had significant concerns about the market and would consider again whether there were grounds for a competition inquiry in 2015 at the latest. However, it noted that there had been a significant reduction in overdraft charges since a previous study in 2008.
To avoid a new inquiry, the OFT wants banks to be more customer-focused and for customers to be better informed and to have a greater choice of banks to choose from. The OFT also wants it to be easier for new banks to enter the industry.
A committee of British lawmakers, tasked with recommending measures to improve banking standards, is expected to put competition at the heart of its proposal when it publishes its final report next month.
In September, new measures will be introduced giving banks a strict seven-day deadline to enable customers to move to a rival bank should they wish to do so. Customers have traditionally been reluctant to move because of the complications involved.
In addition, start-up banks in Britain will not need as much capital as their established rivals from next April.
Competition will also be heightened through the creation of two new banks as a result of branch sales which state-backed RBS and Lloyds must make as a condition of European regulators granting approval for their taxpayer-funded bailouts in 2008.
Lloyds is preparing a stock market listing of 630 branches, which will be rebranded under the TSB banner, last seen on the British high street in the early 1990s.
RBS has similar plans for 312 branches, which will be renamed Williams & Glyn‘s, a name not seen since the 1980s, prior to a stock market flotation next year.
Many Britons were disillusioned with their banks in the aftermath of the 2008 financial crisis and distrust of the industry heightened following scandals such as the rigging of benchmark interest rates and the mis-selling of loan insurance.
Metro Bank became the first new high street lender for more than a century when it launched in 2010. Other challengers such as Virgin Money and retailer Marks & Spencer (MKS.L) have also emerged.
($1 = 0.6554 British pounds)
Editing by Rhys Jones and Helen Massy-Beresford