Yesterday’s publication of the Competition and Markets Authority enquiry into reforming the retail banking sector has provoked a great deal of reaction, not all of it positive.
The Institute of Directors (IoD), also had its say, and was broadly positive, welcoming in particular CMA’s decision to rule out major changes such as a ban on free bank accounts or a break-up of Britain’s biggest banks.
The IoD’s head of economic policy Jimmy McLoughlin said: “The job of regulators is to facilitate the easiest possible solutions, like proposals to encourage price comparison websites, give customers control over their data and allow challenger firms the space to scale-up and compete.”
McLoughlin was especially pleased to see the report had addressed the issue of transparency among banks. “Perhaps the most exciting of the CMA’s remedies is the focus on the value of data as a way of opening up the market to greater competition, allowing for more accurate comparisons between potential lenders. The information revolution offers huge opportunities to harness the power of data, and it is welcome the watchdog is recognising its potential.”
Transparency the key
The CBI, meanwhile also chose to voice its support for the move towards more data sharing and transparency. Interim chief policy director Matthew Fell said: “Business and consumers want competition and choice in the retail banking market, and will welcome the CMA’s initial ideas to improve the Midata service and proposals for a new price comparison website for business.”
That said, competition in the market remains an issue for the CBI. In the next few months of fine tuning its report, Fell urged the CMA to “focus on measures that help challenger banks scale-up, by levelling the playing field on the cost of capital whilst helping to publicise the switching service”.
‘No magic bullet’
But will making switching bank accounts easier – a centrepiece of the CMA measures – really make such a big difference, given some of the underlying structural issues facing banks? George Nikolaidis, EEF senior economist, is skeptical.
“Given the low impact these remedies have had in other failing markets, such as energy, we shouldn’t be putting all our eggs in this particular basket,” he said. “These remedies are unlikely to be the magic bullet that will solve the underlying competition issues in the financial sector,” he added.