The biggest banks of the United Kingdom face a full investigation and review of their competitive, or rather uncompetitive, practices. This will be carried out by the Competition and Markets Authority (CMA).
HSBC, Barclays, RBS, Santander and Lloyds are the big names under the spotlight. The big five, as they are appropriately known, hold 85% of the current account market.
Why is competition such an issue? In a highly competitive free market prices are driven down and quality is driven up. As a general rule of thumb – the larger the number of firms in a free market the greater the level of competitiveness as each firm tries to gain more customers through lower prices and higher quality. In the banking sector competition is low as there are few competitors; the big five feel that there is no requirement to gain more customers.
This inquiry comes just months after Ed Milliband declared that a Labour government would not stand for the desperately uncompetitive banks in the UK; a reform of the banking sector was a necessity. He proposed that, under the Labour government, there will be a cap on the maximum market share that any one bank can hold and that two ‘challenger’ banks will be created and allowed to expand, under Labour’s watchful eye, in order to increase competition in the industry.
‘instead of you serving the banks, the banks will serve you’ according to Mr Milliband.
The Superior Intellect 