UK competition watchdog, the Office of Fair Trading is to probe barriers to entry in the retail banking market in an effort to identify the obstacles to expansion facing new entrants and smaller banks.
The review comes at a time of growing customers disenchantment with long-established high street banking brands and sweeping changes in the ownership of many providers, with the taxpayer holding significant stakes in Lloyds and Royal Bank of Scotland.
The shake-up in the market has attracted a host of potential new entrants, including Metro Bank, Virgin, Tesco, Walton & Co and Home & Savings Bank. However, the long wait for FSA approval and the large investments required to gain a foothold have held up the charge.
A recent report by Citigroup analysts pinpointed funding as the principle barrier for new entrants and noted that the six biggest lenders appeared to be emerging from the credit crunch stronger than ever,
Clive Maxwell, the OFT's senior director for services, says: "The OFT is committed to encouraging competition within retail banking that benefits consumers through cheaper and better products or services. We have recently seen some new players enter retail banking and we want to understand whether there are any hurdles to this or to the expansion of smaller banks."
The review will look at regulatory issues, ease of access to payment systems and credit risk informationm, barriers to achieving scale such as developing branch networks and customer inertia, and barriers to exit.
The call for evidence will run until 8 July 2010 and findings from the review are due to be published by the autumn of this year.
Read the OFT review paper:
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