By Daniel Hunter
British banks will face a full investigation over current accounts for personal and small business customers by the Competition & Markets Authority (CMA).
It will assess the difficulties customers find when switching banks and a lack of competition between smaller banks and the 'Big Four'.
New measures have already been introduced aimed at making it quicker and easier for people to switch banks. But a preliminary investigation carried out by the CMA found that switching rates are still low.
The CMA's investigation has received some opposition from some of the bigger banks. Barclays said an inquiry was "not appropriate at this time".
"Various developments, innovations and stimuli are changing the competitive landscape in in relation to both [personal current accounts] and [SME] banking, and these must be given time to mature," it added.
Lloyds Bank, which is still part owned by the taxpayer, said it would cooperate with the investigation but didn't think it was "necessary".
Some organisations welcomed the investigation. The British Chambers of Commerce (BCC) said: "For many years Britain's dysfunctional banking sector has struggled to meet the needs of SMEs, impeding the growth prospects of some of our most promising young companies."
John Allan, National Chairman of the Federation of Small Businesses (FSB), said:
“The CMA is right to put business banking under the microscope. As the CMA's initial report showed, the market has a number of unwelcome features. It remains worryingly concentrated, with just four banks controlling 85 per cent of business current accounts, with low levels of switching between providers compounded by a lack of price transparency."
Matthew Fell, CBI Director for Competitive Markets, said:
“A healthy and competitive banking market is good for businesses and consumers and vital to the UK’s economic success.
“It’s important that businesses, particularly smaller firms, have choice in financial services so the Government and regulators must continue to promote alternative forms of finance, as well as focusing on competition in banking.”
The investigation is expected to take 18 months to complete.
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