UK Competition and Markets Authority Consults on Proposals to Reform Retail Banking

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.

View the Provisional decision on remedies.