Bosses at Britain’s smaller challenger banks are questioning the Competition and Markets Authority (CMA), saying that watchdog’s latest report “does not go anywhere near far enough” in boosting competitiveness in the retail banking sector.
TSB chief executive Paul Pester said the CMA’s provisional findings, first published this morning, were a “solid first start” but there is a “long way to go to bring real competition to UK banking”.
“We agree with the CMA that there is a significant lack of competition in the UK retail banking market which has been fuelled by a lack of transparency, low levels of switching and a switching service that doesn’t cater for all UK consumers,” Pester said, adding, “We know that only real competition will shift banks’ focus towards the long-term interests of their customers and so fix the culture in banking.”
VirginMoney chief executive Jayne-Anne Gadhia said the CMA’s recommendations “do not go far enough to transform such an important market” and the watchdog should force banks to pay interest on current accounts.
“It is estimated that interest foregone cost customers over £3bn in 2013 and we would like to see all banks being required to pay net credit interest on current account balances,” Gadhia said, adding, “If the CMA made the banks pay interest on current account credit balances at a fair market rate it would drive a more level playing field and cause banks to more carefully consider the charges they make for current account products.”
Paul Lyman, chief executive of Secure Trust Bank and the head of the British Bankers’ Association (BBA) challenger banks panel told City A.M. he was “frustrated” by the CMA’s focus and lack of “real significant initiatives”, saying, “The focus was on the current account market rather than looking at the broad markets. If you’re looking at just one piece of the jigsaw, you're never going to produce a holistic solution.”