A major new competition probe could result in the further break-up of leading high street banks, analysts warned yesterday, with RBS and Lloyds most vulnerable to the demands of regulators.
The Competition and Markets Authority (CMA) today unveils the results of its study of the small business banking market and the current accounts sector.
It can then decide to launch a full market investigation into either or both of those sectors.
Update: Banking watchdog recommends an "in-depth" competition inquiry that could see major lenders broken up
The CMA has powers to order structural remedies, such as breaking up banks deemed to be too dominant, and behavioural remedies, like improving customers’ access to information.
The watchdog will want to show it is an effective regulator and is expected to recommend strong action. The probe is its second since coming into existence in April.
“RBS is number one in small business lending, and Lloyds is number two, so if there are any calls for a break-up or a cut in market share, they are the most likely suspects,” said Bernstein analyst Daniel Lasry. “It would be extreme to suggest a break-up – lending is already low and this would make it lower. But who am I to say they won’t do something ridiculous, when political pressure could be involved?”
Labour has previously called on the CMA to look at carving two new lenders out of the biggest banks, and is expected to demand more measures to increase competition.
“We hope this will look at ways to lower barriers to entry in the market, to create conditions for dynamic and contestable market,” the Federation of Small Businesses (FSB) said.
The FSB expects such measures to take around 18 months to implement, then five to 10 years to have a substantial impact.
Lloyds, RBS and the CMA declined to comment last night.