UK retail banking probe confirmed
The UK banking sector may be set for major changes from 2016, despite the opposition of some of the 'big four'.
The UK's retail banking sector is to be probed by the Competition and Markets Authority (CMA) in a move that might radically transform the way they serve customers.
At heart are the issues of how hard it is for customers to switch banks, the low levels of lending to business and the scarcity of competition for the 'big four'.
It is a probe not all the big banks believe is necessary and there is a chance it could end with them being broken up, although this is only one of a number of possibilities. Indeed, Barclays, HSBC and Lloyds Group all stated in their preliminary submissions after the investigation was first mooted in July that they felt it was unwarranted.
Among the possible outcomes are greater transparency of fees and new measures to break up branch networks, although there are also wider concerns that a changed system could end free banking, a practice almost unique to the UK.
Barclays has said the CMA move is unnecessary at present as a number of "developments, innovations and stimuli" are already making an impact on the industry. It said these "must be given time to mature". HSBC expressed similar views.
Among the developments cited by Barclays are a rise in new entrants, which have managed to erode the market share of the biggest banks. It also said talk of changes to branch networks overlooked the fact that these are becoming gradually less important as more banking is done over the phone and online.
Barclays was joined by Lloyds in questioning the notion that low levels of switching are in itself bad. They both suggested that the mere threat of such action by customers can prompt banks to up their game and improve their services.
The probe is due to be completed by May 5th 2016, so banks will not need to make any radical adjustments yet. However, if indications emerge that radical measures are on the way, banks and other financial institutions may need to prioritise the recruitment of those who have the greatest expertise in handling significant changes in the way such companies are operated.