OFT calls for step change in banking sector
In a speech to bankers, the head of the Office of Fair Trading (OFT) said that banks must improve their services or face being broken-up.
The OFT’s chief executive, John Fingleton, said that despite investigations into the UK’s banking system by competition authorities, consumer bodies and the government, there is still too little competition.
He suggested that banks have been too slow in implementing recommendations on improving their services, such as making it easier for customers to move their accounts.
There has also been little progress on implementing a charging structure that is easier for customers to understand.
Mr Fingleton signalled that the OFT is ready to take tough action unless banks show they can do better for personal account customers.
If banks continue to fail this will be an indication that the fundamental structure of the UK banking sector is a fault and he will refer the matter to the Competition Commission.
In his speech to bankers at a seminar organised by Lloyds Banking Group, Mr Fingleton said:
“Going forward we need to see evidence which demonstrates that the market dynamics of entry and switching are sufficient to drive stronger customer-focused competition.
“Without this the obvious question is whether the concentrated market structure of UK banking is the problem.
“And one way to consider this question is a reference to the Competition Commission.”
The OFT will launch a review of the personal banking market and a referral could be made to the Competition Commission within months.
Meanwhile UK banks have suffered stock market falls after Moody’s credit ratings agency placed them under review.
Barclays, Royal Bank of Scotland and HSBC are all at risk of having their credit rating downgraded in the face of the ongoing economic downturn eurozone debt crisis.
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