Office of Fair Trading's Chief Executive signals the need for change in the UK banking sector
John Fingleton stated in his speech of 16 February that incremental changes in the banking sector had not sufficiently addressed concerns about the structure and performance of banks.
In addition to challenges faced by new entrants such as Metro Bank, the UK's first new high street lender in more than 100 years, banks that offer a better deal find it difficult to increase their market share due to a longstanding lack of competition in the sector, with little incentive for innovation, efficiency or consumer focus.
Problems highlighted in a report on competition in the UK banking sector dated 2000, such as perceived barriers to the switching of personal current accounts, still remain. Similarly, a previous Office of Fair Trading (OFT) market study, which found that consumers paid insufficient attention to unarranged overdraft charges and forgone interest, has not led to substantial change. The lack of focus on customer experience is an ongoing concern that will also be the focus of the Financial Conduct Authority.
Fingleton suggested that a reference to the Competition Commission (CC) may be necessary within the next 3 years should banks fail to introduce innovative payment services and make it easier for customers to switch accounts. The outcome of the review of the personal current account market, scheduled to take place later this year, and the Independent Commission on Banking's work on separating retail and investment banking, will reveal whether such a reference is necessary.