THE BANKING industry is changing so dramatically that the new competition regulator may choose not launch an investigation into the market, City A.M. understands.
The move comes despite calls from Labour’s Ed Miliband to shake up the sector. The opposition leader wants to create two new banks – possibly carving them out of Lloyds and RBS.
British banking has historically been highly concentrated, with few new entrants and customers unable or unwilling to move banks.
But the Competition and Markets Authority (CMA), which officially comes into operation tomorrow, is understood to be considering leaving the industry alone for a time to let new changes come in to effect.
More than 20 new banks are in the process of applying for a licence, while the sector is also being changed with the launch of TSB – cut out of Lloyds – and Williams & Glyn, with its branches taken from RBS. It is now easier for customers to change current accounts too, using the seven day switching scheme.
The CMA will decide this summer on how to proceed, and may choose to see how these affect competition before deciding whether to launch a full investigation.
Even if the CMA does launch a probe and then finds a problem in the sector, it has a range of other tools short of breaking up banks that could encourage more competition.
Labour maintained the party does intend to reform the sector further. “We will reform competition in the banking market, with a legal limit to prevent banks getting too big and at least two new challenger banks,” said a spokesperson yesterday.