Markets regulator the Competition and Markets Authority (CMA) is pushing for a probe into the lack of competition in retail and small business banking. Some fear that this could lead to some of the UK’s largest lenders being broken up.

Two of the largest UK lenders, Royal Bank of Scotland (RBS) and Lloyds Banking (LLOY), have seen their shares slide in  response, down 2.2% to 316.4p and 0.7% to 72.6p respectively. This pair, together with Barclays (BARC) and HSBC (HSBA),  account for 77% of high street banking and 90% of small business lending, according to the CMA.

Web - Bank probe - 18 July 2014

The CMA is holding a consultation in a bid to open up the market and give customers more choice. This could see a new comparison website created to improve transparency and set new account opening standards.

However, it could result in the big four banks having to sell certain branches to reduce market share in the same way Lloyds had to dispose of the 631-outlets that now trades as TSB.

Lloyds and RBS would be hit hardest by any break-up due to their pulling out of international markets in recent years to focus on the UK.

The probe echoes last week’s call by Labour Party leader Ed Miliband to limit the big four’s market share. A decision on whether an 18-month investigation should be launched will be made in the autumn.

Issue Date: 18 Jul 2014