The Competition and Markets Authority wants to see an in-depth investigation into competition in the SME banking and current accounts markets following work it carried out with the FCA.
The findings represent the first collaboration between the CMA and the financial regulator.
The review found “evidence that competition is not effectively serving the interests of SMEs and personal current account (holders).”
It says barriers to entry and expansion for smaller banks remain high; levels of shopping around and switching between banks is low; and there is limited transparency when making comparison between banks.
The CMA adds it is particularly concerned that cross-subsidies in the personal current account market between other banking products and client groups may “distort competition”.
The findings of the market study have prompted the CMA to take a provisional decision to launch a wider review but will consult on whether ”a review is an administrative priority for the CMA.”
If a full review found a lack of competition the CMA could intervene.
CMA chief executive Alex Chisholm says: “Our studies have found that despite some positive developments, significant competition concerns remain which mean 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.”
British Bankers’ Association chief executive Anthony Browne says: “All the banks will co-operate fully with this review and any subsequent investigation. There are substantial changes currently underway across the banking industry to strengthen competition – which improves choice and service for customers. We welcome the fact that the CMA has recognised there have been a number of recent improvements for customers.”