In August 2016, the CMA published its final report following its investigation into the competitiveness of retail banking market (Report), which focused on personal current account and SME customers. The Report found that there were elements of the market that were having an adverse effect on the promotion of competition, and proposed a package of remedies to address the perceived weaknesses. The Report also asked the FCA to take certain actions to follow up on the findings of the Report in certain areas, including developing and implementing measures to improve the quality of customer service provided by banks, and research and develop measures to improve customers’ awareness of their use of overdrafts.
On 3 November 2016, the FCA published its response to the Report. It stated that it intends to take actions in the areas identified by the CMA. Additionally, the FCA announced that it intends to take further actions in two additional areas, examining the cost of credit by way of overdrafts in the wider consumer credit market, and by carrying out further work on wider competition issues in the retail banking banking, including investigating “free-if-in-credit” banking, which the Report did not cover. FCA’s response says it will also consider a review of the maximum monthly charge, and will also engage with Open Banking and will set up an expert group to consider what better, more comparable, information it could require banks to publish. It also plans to look beyond current accounts to consider links with other retail banking products and effects of the business model on competition and conduct in relation to those products. It will carry out significant work over the next two years. The Treasury response looks at what Treasury proposes to do to meet the recommendations that it:
- give an authority (the PSR or FCA) powers over the Current Account Switch Service;
- work with credit reference agencies and SME lenders to help SMEs look for finance without risking an adverse effect on their credit rating;
- to set up information sharing networks that SMEs and finance providers can benefit from; and
to facilitate work with the British Business Bank to help SMEs choose the right type of finance.
The FCA will publish further information about its plans in its next business plan.