An influential group of MPs has lashed out at a light-touch report into high street banking, days before the City watchdog publishes its verdict on the sector.
Treasury Select Committee chair Andrew Tyrie said the failure of the Competition and Markets Authority to propose dramatic reform smacked of “complacency”, while Labour MP Rachel Reeves said the investigation was “letting down the most financially vulnerable”.
“Why do you think it is that politicians, the media, the consumer groups, challenger banks and many academics are all going in one direction and you're going in another?” Tyrie asked Alasdair Smith, who chaired the CMS investigation.
"Most of them have concluded that you have dropped the catch."
The Financial Conduct Authority will publish a response to the CMA's work within days. Reeves is hopeful of progress on overdraft charges, but accused the CMA of "passing the buck to the FCA." She added: "It is a dereliction of duty."
The CMA report was met with anger from from challenger banks when it was published in the summer. Challengers said it failed to tackle fundamental impediments to competition, including the size of mandatory capital buffers imposed on small lenders, and the imposition of a corporation tax surcharge which seemed to punish new entrants to the market who had nothing to do with the financial crisis.
Today, smaller banks remain unsure whether or not significant reforms will arrive.
Virgin Money chief executive Jayne-Anne Gadhia told City A.M. she is focused on alternative ways to attract more customers, including a partnership with former Barclays boss Anthony Jenkins' new fintech start up, 10x Future Technologies.
“We see that as an opportunity to be able to compete at a lower cost. And once everyone is clear what the final rules really are, then we will think then about how we can compete, rather than hoping for any change from the CMA report,” she said.
Secure Trust chief executive Paul Lynam added he is hopeful that chancellor Philip Hammond may provide more support for challengers than his predecessor George Osborne, arguing that the outrage among select committee members could also provoke reform.
“The mood music coming out of the Treasury committee is such that these very influential MPs recognise that this has been a very poor return on taxpayers' money for the review,” Lynam said, referring to the £5m cost of the CMA report.