CMA to look into banks with a full enquiry

[leclerc]

www.bbc.co.uk/news/business-28357675

[leclerc]

Re: CMA to look into banks with a full enquiry

It looks like the origin of the story was from Bloomberg: http://www.bloomberg.com/news/2014-0...s-lending.html

[leclerc]

Re: CMA to look into banks with a full enquiry

http://www.telegraph.co.uk/finance/n...iry-looms.html

If anyone is awake at 7am then go to the CMA website and link their statement on this thread. I will be asleep

[EXC]

Re: CMA to look into banks with a full enquiry

Will do and thanks for the heads up.

They'll need to consult first but this has been a long time coming.

[EXC]

Re: CMA to look into banks with a full enquiry

Press release
Personal current accounts and small business banking not working well for customers

From:Competition and Markets AuthorityHistory:Published 18 July 2014 Part of:Preventing and reducing anti-competitive activities and Business and enterprise
CMA consulting on provisional decision to launch an in-depth investigation.






Essential parts of the UK retail banking sector lack effective competition and do not meet the needs of personal consumers or small and medium sized enterprises (SMEs), two studies by the Competition and Markets Authority (CMA), published today, have found.
The SME banking market study is the conclusion of a joint project with the Financial Conduct Authority (FCA), and represents the first formal collaboration between the organisations. The FCA also provided input into the CMA’s study of the personal current account (PCA) sector.
The CMA is now consulting on its provisional decision that there should be a joined up in-depth market investigation into the markets for personal current accounts (with revenues of over £8 billion) and SME banking (including the over £2 billion business current account market and business loans).
The CMA and FCA have carefully considered a wide range of recent regulatory initiatives and other developments designed to improve competition. These include initiatives to make the authorisation regime for new banks simpler and faster, to make switching easier and also to improve transparency. However, despite these important developments, and evidence of new entry, the market studies have identified a number of common concerns, together with evidence that competition is not effectively serving the interests of SMEs or PCA customers. In particular:

• Barriers to entry and expansion for newer and smaller banks remain significant and the markets remain concentrated, particularly in Scotland and Northern Ireland.
  
• There is very little movement in the market share of the largest banks (other than as a result of mergers and acquisitions).
  
• Many customers see little difference between the largest banks in terms of the services they offer.
  
• Levels of shopping around and switching between banks remain low. Perhaps as a result, very limited market share gains have been made in recent years by those banks with the highest levels of customer satisfaction – not what would normally be expected in well-functioning competitive markets.
  
• Limited transparency, and difficulties for customers in making comparisons between banks, particularly for overdraft charges on PCAs which are very complex. This makes it hard for customers to choose the cheapest or most appropriate accounts for them, so limiting banks’ incentives to compete. This may result in higher overdraft charges than would otherwise be the case.
  
• It is also possible that, particularly for PCAs, there is a degree of cross-subsidy, both from other retail banking products and, on the ‘free-if-in-credit’ model, between different customer groups, which may distort competition.

During the consultation, the CMA will be interested to hear views about these issues in particular and the impact of recent developments. The CMA is also particularly interested in hearing views on the ‘in principle’ proposals to remedy suspected problems in the SME banking sector that have been put forward by Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland Group, which they consider should be implemented instead of a market investigation reference being made. These proposals would involve those banks giving the CMA undertakings to set up a comparison website to improve transparency; to establish new account opening standards to make it easier for SMEs switching banks to open accounts; and to take certain promotional measures to facilitate comparability and switching. We provisionally consider that it would be more appropriate to conduct a full investigation than to accept these proposals. However, we remain open to views on this issue before we take a final decision regarding a market investigation in the autumn.
Alex Chisholm, CMA Chief Executive, said:

Competitive personal and SME banking markets are essential to households and businesses throughout the country, and to the success of the UK economy.
However, our studies have found that despite some positive developments, significant competition concerns remain which mean that customers may not be getting consistently good service and value from their banks.
Our provisional view is that a full market investigation by an independent, expert CMA group is necessary to look at this market in detail and identify appropriate measures if competition concerns are found. However we very much welcome views, which we will carefully consider, before taking a final decision.

The CMA has also conducted a preliminary assessment of the undertakings given following the Competition Commission’s investigation into SME banking in 2002, which were intended to facilitate switching and improve transparency. While the CMA considers that these undertakings remain valuable, it is minded to review whether they need to be varied given recent changes in the switching process. The CMA therefore also invites comments on whether such a review is required. In the meantime, the CMA is reviewing submissions received by banks one week ago regarding compliance with the 2002 undertakings, as announced by the Office of Fair Trading on 11 March 2014.
All comments, on either the provisional decision to refer the PCA and SME banking market, (including on whether the CMA should accept proposals put forward by some banks for undertakings in lieu of a reference), or whether to review the 2002 SME banking undertakings, should be sent to the CMA by 17 September 2014 to:
Retail Banking Team
Competition and Markets Authority
Victoria House
Southampton Row
London WC1B 4AD



Email: retailbanking@cma.gsi.gov.uk
Key facts and findings from the CMA market studies

The largest 4 providers account for over 77% of the market in the UK.	The largest 4 providers account for over 85% of Business Current Accounts (BCA) and 90% of business loans.
65 million active accounts.	Over 3.5 million BCAs.
Barriers to entry remain, including the need for a network of local branches, with over half of personal customers using them once a month.	Barriers to entry remain significant, including the need for a network of local branches. Almost 70% of SMEs agree that having a local branch is still important.
Notable new entrants in recent years include Metro Bank, Tesco Bank (from June 2014) and TSB (as a result of the current divestment by Lloyds Bank). Their combined market share is around 5%, of which TSB represents 4.2%.	There has only been one entrant into full service SME banking – Metro Bank – in recent years.
Annual switching levels remain low – only 3% of personal customers switch bank each year.	Annual switching levels remain low – only 4% of SMEs switch bank each year.
The new current account switching service (CASS) seems to be working, but there has been relatively little increase in switching in its first 9 months.	Fewer than 30% of SMEs shop around regularly for BCAs and loan products.
Satisfaction levels with the ‘big 4’ banks are less than 60%, yet their market shares have remained stable. Other banks with higher satisfaction ratings have not been able to acquire market share quickly.	Satisfaction levels of SMEs with the ‘big 4’ banks for BCAs are around 60%. 13% trust their bank to act in their best interests and only 25% feel supported by their bank.

Notes for editors

1. For further information on the CMA’s programme of work in aspects of retail banking, including the market study reports and the provisional decision in relation to a market investigation reference (MIR), please visit the PCAs and SME banking case page.
2. The SME banking market study is a joint project between the CMA and FCA, although the proposed decision regarding an MIR, consistent with the current legal position, is the CMA’s alone. The CMA also liaised closely with the FCA during its work on personal current accounts. The FCA’s webpage in relation to SME banking can be found here.
3. For further information on the FCA’s competition work programme, including its work in other areas of retail banking such as the cash savings market study, please visit the FCA’s website.
4. Under section 131 of the Enterprise Act 2002, the CMA may make a market investigation reference to its Chair for the constitution of a group where it has reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services, prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.
5. The compliance concerns regarding the 2002 undertakings, which the CMA is currently considering, relates to aspects of the undertakings which restrict the affected banks’ ability to require an SME to take out a business current account if they wish to obtain a business loan. The CMA has very recently received detailed audit reports from the affected banks on this issue and intends to make a further announcement on this issue.
6. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition functions (and certain consumer functions) of the OFT. For more information on the CMA, see its homepage, follow its Twitter @CMAgovuk or Flickr account or visit its LinkedIn page.
7. Media enquiries should be directed to Michael Rosen or by ringing 020 3738 6133.

[EXC]

Re: CMA to look into banks with a full enquiry

Limited transparency, and difficulties for customers in making comparisons between banks, particularly for overdraft charges on PCAs which are very complex. This makes it hard for customers to choose the cheapest or most appropriate accounts for them, so limiting banks’ incentives to compete. This may result in higher overdraft charges than would otherwise be the case.

Praise the lord.

Overdraft charges are so unfathomable, if you went into any bank and asked how much an account is going to cost you they simply wouldn't be able to give you a clue. The best they could do is give you reams of data and a calculator.

This is a ludicrous situation and one which is so obviously anti-competitive.

[Amethyst]

Re: CMA to look into banks with a full enquiry

Praise the lord.

Overdraft charges are so unfathomable, if you went into any bank and asked how much an account is going to cost you they simply wouldn't be able to give you a clue. The best they could do is give you reams of data and a calculator.

This is a ludicrous situation and one which is so obviously anti-competitive.

I'll put the consultation in the 'Make A Difference' Forum.

[EXC]

Re: CMA to look into banks with a full enquiry

Yes we need to do an LB response to this.

Just reading the consultation paper:

Moreover, overdraft revenues overall have fallen by just 3% over the last couple of years

According my figures which were cobbled together by a combination of OFT publications and FoI requests, they're still raking in quite a bit.

Revenue from Unarranged Overdraft Charges
2006 £2.54 billion
2007 £2.48 billion
2008 £2.76 billion
2009 £2.52 billion
2010 £2.00 billion
2011 £1.72 billion

[Amethyst]

Re: CMA to look into banks with a full enquiry

These our LB's responses to the historic PCA consultations.

November 2008
~~~~~Beagles formal response to OFT PCA Market Study Consultation Nov 2008~~~~~~ - Legal Beagles

Updated Response February 2010
Updated Response to the PCA Report - Feb 2010 - Legal Beagles Consumer Forum

[Amethyst]

Re: CMA to look into banks with a full enquiry

We know that overdraft charging has remained complicated, I was trying yesterday to work out if Santander's changes coming in in August are actually cheaper or more expensive. My maths isn't fabulous, but it should be CLEAR to consumers, not need a Math Degree to be able to work it out.

I also couldn't see reference to the 'Scenarios' - have they now been ditched?

[EXC]

Re: CMA to look into banks with a full enquiry

I also couldn't see reference to the 'Scenarios' - have they now been ditched?

I was just looking for that!

I think they may have been ditched in favour of the price comparison page on the Money Advice Service site.

The scenarios were originally promoted on the OFT site as the answer to the lack of competition and I was just looking for the FoI request about how many hits it had had in the first 6 months. I can't remember exactly how many it was but it was something like 1200. Absolutely pathetic and quite how OFT had any faith in it will remain a mystery.

[Amethyst]

Re: CMA to look into banks with a full enquiry

Well this took some hunting;

Not highly useful I must say. You might be right about the price comp on MAS ( https://compare.moneyadviceservice.o...counts/Results )




found in document attached to http://www.santander-products.co.uk/...t_account.html

[EXC]

Re: CMA to look into banks with a full enquiry

I remember the first OFT report after the scenarios were required to be published on banks' sites noted that some were difficult to find lol.

I thought they were meant to quote 7 (or more?) standardized scenarios.

[Amethyst]

Re: CMA to look into banks with a full enquiry

lol on the 1200 hits, I think I visited it ONCE before and decided it was pointless.

Just tested it £1000 in each month, going £100 overdrawn and 3 unarranged OD's a month.

Top of Table



Bottom of Table



So I'm not very suprised it isn't promoted particularly by the big banks lol.

[enaid]

Re: CMA to look into banks with a full enquiry

Looks like when the new regs come in PDLs will come up trumps if the banks don't sort the mess out.