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On May 17, 2016, the Competition and Markets Authority published
a provisional decision on how they propose to remedy competition
issues they have identified in the supply of personal current
accounts and retail banking services for small and medium-sized
enterprises. The decision is part of the CMA's retail banking
investigation which commenced on June 19, 2013. The CMA considers
that competitive pressures in retail banking are weak and that
break up or other structural changes to the banking sector are not
the most effective and proportionate way to increase competition.
Instead, the CMA is proposing a package of remedies, focused on
innovation and the provision of information to customers, coupled
with technological development.
The package of remedies includes: (i) cross-cutting foundation
measures with the objective of increasing customer engagement via
customer prompts, to improve transparency and make better quality
information available to customers; (ii) implementation of measures
to make current account switching more efficient, building on and
improving the existing Current Account Switch Service; (iii) the
introduction of a set of interventions aimed at overdraft users, in
particular, those who have suffered from competition failures in
the personal current account market; and (iv) targeted measures
aimed at specific problems faced by SMEs in comparing different
providers of loans and accounts.
The CMA is also exploring the nature of
"free-if-in-credit" current accounts, commenting that
whilst the account may suit some customers, it may not be
appropriate for many customers who have overdraft accounts. The CMA
also noted that unarranged overdrafts generate large revenue
streams for banks whilst consumers may be unaware of the costs that
they are incurring. To address this, the CMA has proposed that
banks set a monthly maximum charge for unarranged overdrafts on
personal accounts. Responses to the CMA's proposals are due by
June 7, 2016.
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