Baroness Susan Kramer is calling for a cap on market share for banks and says the sector should be immediately referred to the Competition and Markets Authority.
Writing in Banking 2020: A Vision for the future, a New Economics Foundation report published this week, Liberal Democrat Baroness Kramer wants to end market dominance by big banks.
She says: “New competitors will take time to grow organically and we need a fully functional banking system in the near-term to support recovery in our economy.
“So, I would argue that we should refer the industry to the new Competition and Markets Authority now, in contrast to the Office of Fair Trading’s recommendation that it consider such a referral in a few years’ time.
“The USA sets a cap on market concentrations for its banks to force competition. I see no reason why we should not do the same.”
The Competition and Markets Authority would undertake an in-depth examination into whether the make-up of the sector is harming competition and can recommend remedies.
In January, the OFT decided against referring the sector to the CMA, claiming the EU decision to force the sale of almost 1,000 branches by Lloyds Banking Group and Royal Bank of Scotland would be enough to boost competition.
John Charcol senior technical manager Ray Boulger says: “It is a crackpot idea. An investigation would waste millions of pounds of taxpayers and banks’ money which would ultimately hit customers.”