But small lenders cheered the probe as a chance to end the dominance of the giant high street banks.
The Competition and Markets Authority (CMA) is investigating the personal current account and the small business lending markets.
Despite the 20 per cent rise in current account switching in the past year and the creation of several new banks, the CMA warned it might need to act.
And regulators say costs and fees can be opaque and hard to compare in the SME market, limiting competition.
One outcome could be forcing the big banks to carve out new lenders from their branch networks – something Lloyds and RBS have already done once each with the creation of TSB and Williams and Glynn.
Any further such steps would repeat the £1bn-plus cost of creating a new bank, hitting the big players.
Another option could include making current account numbers portable like mobile phone numbers, or reducing the time to switch from the current seven working days.
“We believe that the decision to conduct a full investigation will provide an important opportunity for key issues facing the industry and how it supports its customers to be examined,” said Lloyds. Its shares fell 0.92 per cent on the day. RBS’ fell 0.55 per cent and Barclays’ 0.71 per cent. HSBC’s rose 0.36 per cent on the day.
WHAT SMALL BANKS SAY
■ Metro Bank: “No market where such a small number of players hold such a large percentage of the market share should be described as efficient or competitive.”
■ The Post Office: “Further work is needed to ensure customers understand they have the choice to shop around.”
■ Aldermore: “It is highly concerning that the dominance of the big four continues, despite there being little difference in terms of service offered.”