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UK Banks to Be Broken Up By the Competition Watchdog

RBS, HSBC, Barclays and Lloyds could be forced to break up after a finance watchdog’s inquiry. The watchdog has made claims that Britain’s banking sector is characterised by anti-competitiveness and a failure to meet ordinary citizens and small business’ needs.

The newly established Competition and Markets Authority (CMA) has out done their predecessors who were willing to launch an enquiry of this nature until 2015.

The ‘big four’ banks in Britain; Lloyds Banking Group (which includes the likes of Halifax, Bank of Scotland and Blackhorse to name a few), Royal Bank of Scotland (along with Natwest), HSBC and Barclays are the ones that dominate the UK’s yearly £10bn, banking sector. All four of the banks have been shrouded in scandals such as the mis-selling of PPI, and various other dramas in the past few years yet between them, they control 77% of the UK citizen’s current accounts, 85% of UK small business’ current accounts, and a rather overwhelming 90% of UK business loans.


Two different CMA studies which were published on Friday 18th July, concluded that core elements of the UK’s retail banking sector have a significant lack of “effective competition” and ultimately, they fail to meet the needs of personal consumers or small to medium-sized enterprises (SMEs).

This research from the CMA has revealed that while public satisfaction with these dominant banks falls shy of 60% and their market shares have remained fairly resolute. The studies concluded have concluded that smaller banks with higher satisfaction ratings were simply unable to compete or acquire a sizeable share of the market.

Speaking about their studies, Alex Chisholm, the CMA’s chief executive has said: “Competitive personal and SME banking markets are essential to households and businesses throughout the country, and to the success of the UK economy. However, our studies have found that despite some positive developments, significant competition concerns remain which mean that customers may not be getting consistently good service and value from their banks,”


The plans for the CMA to launch the enquiry have come about at a time when the UK’s banking sector is coming under increased scrutiny from within the political ranks in Britain. Ed Miliband, leader of the Labour party has vowed to back a competition investigation if he is elected in next May’s general election and shadow Chancellor, Ed Balls has also come out and emphasized the need for widespread reform.

Speaking on the need for reform, Ed Balls said: “As we said earlier this year, in the next parliament we need to see at least two new challenger banks and a market-share test to ensure the market stays competitive for the long term.”


According to the British Bankers’ Association (BBA) there are currently a number of substantial changes underway in Britain’s banking sector at the minute. The association has recently published a range of proposals it claims would encourage and facilitate the growth of new and emerging UK banks. The BBA had hoped that the regulators and politicians would have been amenable to their suggestions but the CMA has elected to carry on with and pursue a full-scale inquiry.

Theoretically, such an inquiry could result in a full-scale break up of Britain’s largest banks but reform to this extent is rare. Following on from the enquiry, the CMA will more than likely demand banks cultivate new networks of branches and become much more transparent with respect to their charges.

Move Your Money (MYM) an ethical banking group have welcome the CMA’s planned investigation. Charlotte Webster, campaign manager for MYM had this to say: “We’ve been saying this for years. People want real alternatives. This is something the big banks would have you believe don’t exist, but they do.”

Millions of people in the UK changed banks last year, but a concrete shift from a monopolised banking sector to one that is characterised by diversity and ethics is something that is yet to be realised.

The CMA’s investigation is the 10th analysis of the market since Don Cruickshank was commissioned to examine the industry, by then Prime Minister, Tony Blair in 1999. Former investment banking correspondent at the Financial Times, Chris Hughes has suggested that the UK banks “have much to fear” from the probe that is looming large, however the independence, comprehensiveness and efficacy of this planned enquiry remains to be seen.

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Daniel Lee

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