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Banks must get houses in order by 2015 or face penalty

Sir John Vickers says the banking industry should be referred to the Competition Commission if his competition reforms are not implemented by 2015.

Launching the ICB’s final report in London this week, commission chairman Vickers highlighted three specific competition reforms.

He said the Government must work with Lloyds to ensure its planned sell-off of more than 630 branches results in a strong challenger bank. He said that as it stands, the divestiture will not achieve that.

Second, a “seamless” switching system for personal current accounts should be introduced and, third, the Financial Conduct Authority must be given a stronger duty to promote competition than currently proposed.

Under current proposals, the FCA must promote competition so far as it is compatible with its other objectives, including protecting and enhancing confidence in the financial system.

Vickers said the reforms are necessary because competition in the UK retail market has not been effective, conditions to foster well informed customer choice are not in place and banks have exploited a lack of customer and regulatory awareness for their benefit.

Vickers says: “We are not, at this point, recommending that markets for banking services be referred to the Competition Commission but a referral should be actively considered if any of the three conditions just mentioned is not met by 2015.”

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