IN TERMS of shaking up banking competition, the proof of the pudding is in the market shares. And the new probe by the Competition and Markets Authority (CMA) into current accounts and small business banking is because the regulator believes not much has changed in this key metric over the past decade and more.
The CMA’s predecessor, the Competition Commission, looked at small and medium-sized business banking in 2002. At that time agreements were put in place to help SMEs shop around by stopping them feeling compelled to take bundles of financial products together.
However, it looks like a case of plus ça change. Yes, new players have entered the banking sector, such as the likes of TSB, Virgin Finance, Tesco Bank and Metro Bank. But in the financial crisis HBOS collapsed into the arms of Lloyds, Northern Rock imploded, and Alliance & Leicester and Bradford & Bingley were hoovered up by Spanish giant Santander, which some years earlier had taken out Abbey National.
The effect, in many ways, has been that what individuals and SMEs have gained in terms of consumer choice on the swings they have lost on the roundabouts.
Back to those damning market shares. The Big Four – Lloyds, Royal Bank of Scotland/NatWest, HSBC and Barclays – still have more than three-quarters of the UK’s personal current accounts.
They have well over eight out of ten of the nation’s business current accounts, and provide nine out of every ten business loans. Those market shares are hardly changed from ten years ago, and even with a new switching service that has made it seasier to change banks, less than 3 per cent of the population do so each year.
If that is banking competition, I’d hate to see what a cartel looked like. The CMA’s other concerns include the barriers to entry of new players to challenge the status quo, and the lack of transparency in the industry on comparing – and indeed, working out – complex overdraft charges.
The truth is that, since the financial crisis, despite periodic political hand-wringing about inadequate competition, the authorities have been more concerned with defusing systemic risk by getting banks to rebuild their balance sheets and separating retail arms from riskier investment banking.
A better deal for consumers has necessarily been de-prioritised. The CMA’s inquiry – expected to be concluded in 2016, eight years after the financial crash – can hopefully move on from banking’s balance sheet and cultural repair to a better deal for customers.
Morrisons better, but that’s not saying much
IN SOME ways it is hard to understand why shares in Morrisons jumped sharply yesterday. The supermarket group continued its troubled trading, with like-for-like sales down 6.3 per cent in its third trading quarter. And that was worse than the City expected, with the consensus forecast of a 5.2 per cent slide in sales. Perhaps the one tangible positive was that at least the latest sales fall was better than the alarming 7.6 per cent slump in Q2.
But investing in the stock is still a leap of faith. Morrisons is less than one year into a three-year turnaround programme under chief executive Dalton Philips.
It was late into online and convenience stores, and those operations are still playing catch-up. The threat from the discounters Aldi and Lidl continues, even if Morrisons has been the first of the big four to say it will match their prices.
But the group remains, until further evidence, a troubled company in a difficult sector.
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