The Competition and Markets Authority has released its long-awaited report into the UK's banks, announcing a package of reforms it says will "shake up retail banking for years to come" and ensure customers and small businesses "get a better deal".
Alasdair Smith, chair of the two-year retail banking investigation carried out by the CMS, said: “These reforms will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks. We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.
“Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets. We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs. This is backed up by a wide package of measures to improve the current account switching service, to make it easier for small businesses to shop around and open new accounts or get a loan, and to see how the quality of service provided by your bank compares with other providers.”
Here, we look at the reaction from across British business.
Mike Cherry, chairman, Federation of Small Businesses
Today’s banking market does not work well for small businesses. The CMA’s recommendations will help to create a more customer focused retail banking market by tackling some of the challenges small firms face. The FSB is deeply concerned about the worrying pace of branch closures and the impact this is having on some small businesses’ ability to make informed banking decisions, particularly in rural areas. Unfortunately, 2016 is already looking like a record-breaking year for closures. We are pleased the CMA has taken forward our recommendations of greater communication and support to affected small business customers, but we now want ministers to look at further options to protect small businesses’ access to their local bank.
Suren Thiru, Head of Economics and Business Finance, British Chambers of Commerce
The report fails to address the structural problems in the provision of business finance, which are holding back some of our most dynamic young firms. The CMA must also tread carefully in the sharing of data by finance providers via the Open Banking programme, to ensure that businesses retain control over who has access to their data – otherwise any trust between lenders and businesses could be destroyed. This report must be the start, rather than the end, of the drive to improve competition and greater choice in SME banking, as our recent survey work has shown that awareness of alternative funding options is low among businesses. The government must also address some of the deep-rooted problems in the provision of finance, such as the availability of long-term patient capital. Finance providers should actively promote the initiatives endorsed by the CMA too, if we are to see real change on the ground for business banking customers.
Andrew Tyrie, chairman of the Treasury Select Committee
The CMA is relying on the rolling out of new technology to do the heavy lifting on competition. But many customers will not have the tools or skills to do this. Customers are also – understandably – wary of the data-sharing required for this to be effective. The Committee has been at this issue for six years. Its recommendations, and those of the Banking Commission, were unequivocal on the need for much greater choice. We are not giving up now.
Nic Beishon, Head of Commercial, Equifax UK & Ireland
The CMA’s order to improve SME lending services is a much-needed step to increase competition. We are in an uncertain environment for the UK economy and all moves to support our smaller businesses should be welcomed. Mark Carney has given banks ‘no excuse’ not to pass on rate cuts, and the CMA’s moves will help ensure that SMEs can borrow at the most competitive rates available. These tools will bypass time-consuming paperwork and make it much easier for SMEs to find out if they’re eligible for a loan. By speeding up the decision making process, and providing an early indication of interest rates, SMEs will be much more likely to shop around for the best deals.
The banks covered by the order need to prioritise implementation to make sure they have the right processes and technology to support robust lending decisions under the new regime. While only four banks are obliged to introduce the tools at this stage, we believe that other lenders, including challenger banks, should introduce the same tools to ensure their offering stacks up against larger players.
Paul Pester, chief executive, TSB
Banking must be the only industry that doesn’t tell its customers how much they are paying for their services. Consumers need to be equipped with the necessary tools in order to make informed choices about the best products and services for their needs. This is why we will continue to champion transparency over the true cost of banking through the creation of a Monthly Bill. The CMA’s report is only the first rung on the ladder and, while disappointing, it should not constrain the Government in its ambition to achieve a truly competitive banking market.
Gillian Guy, chief executive, Citizens Advice
The CMA’s move to force banks to be clear on their maximum overdraft charges is good, but banks really need to step up to the plate and set limits that are fair on consumers. Better use of data is a positive step and could make it easier to switch and unlock benefits for customers. The changes announced today need to be monitored closely to ensure they are effective - and stronger measures should be kept on the table if they are not working.
Adam Tyler, chief executive, National Association of Commercial Finance Brokers
The report is a giant step in the right direction. If the small business community is going to take advantage of the opportunities presented post-Brexit, the government must drum home the message that banks aren’t the only route to funding. With the diversity of funding options now available to SMEs, it's staggering that most small business owners turn to their existing bank for finance.