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The CMA’s proposed changes to banking don’t go far enough

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The Competition and Markets Authority (CMA) has made a number of suggestions to improve the current account market. But they don’t go far enough.

Today we got a chance to see what the CMA has been working on in its 18 month investigation of the current account market. It’s confirmed what we’ve been saying for some time – competition in the banking market just isn’t working.

A lack of competition

The big four banks – Lloyds, Royal Bank of Scotland, HSBC and Barclays – control more than three quarters of Britain’s personal current accounts. And that’s not likely to change any time soon, since only 3% of customers switched in 2014.

More than a third of customers have been with the same bank for more than 20 years. Indeed, it’s quite telling that you’re more likely to break up with your partner than with your bank. No wonder the big banks are failing to compete for our business.

Our campaign supporter Anthony has harsh words for the banks:

‘Banks are making money out of people who don’t switch or check their accounts regularly. Often these people will be elderly or vulnerable. Most banks do not reward customer loyalty, act amorally and treat savers with contempt.’

Making it easier to switch

The CMA makes it very clear that competition isn’t working and that we need to be encouraged to switch from accounts that aren’t right for us. And breaking up with your bank could be good for your pocket, with the CMA suggesting that you could be £70 a year better off. That rises to £260 a year if someone’s regularly dipping into their overdraft.

So what does the CMA propose should change? Their suggestions include:

  • Banks prompting customers to switch at certain trigger points, such as after branch closures or when overdraft charges change
  • Making it easier for us to switch by allowing customers to see their transaction history to help us compare banks
  • Funding a ‘sustained’ advertising campaign for the Current Account Switching Service to help raise public confidence in switching

We need more radical action

But will these changes actually change banks’ behaviour? We don’t think so, and we’d like to see more radical action. The CMA’s own evidence shows that people are disengaged from the banking market, so better information and nudges to switch simply won’t be enough.

We need to see creative solutions that’ll spur the banks into genuinely competing with one another. So we want the CMA to:

  • Look at forcing banks to more proactively help customers who regularly use an unauthorised overdraft, as well as increasing compensation for customers who suffer poor service
  • Regularly name and shame the worst providers for bad behaviour
  • Consider how banks can put people in control of their overdrafts, for example by notifying customers before they go into the red

The regulator now has six months to find more radical ways to promote switching, improve information for customers and punish banks who fail to treat their customers fairly.

Do the CMA’s proposed changes to the bank current account market go far enough?

No (72%, 1,082 Votes)

Don’t know (23%, 340 Votes)

Yes (6%, 86 Votes)

Total Voters: 1,508

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Useful links

Read the CMA’s retail banking market investigation – summary of provisional findings report (PDF)


I was with TSB for many years then it became LloydsTSB. Now they are seperate banks but TSB’s nearest branch is 6 miles away and in the town centre, making it inconvenient and much more time and effort to get to, but Lloyds is 10 minutes away . It seems TSB are offering better deals AT THE MOMENT, but nothing significant worth giving one a reason to switch. Satander seemed to give good offers but again its branch is in the town centre plus it appears to have now withdrawn certain offers which made it attractive to use. Does it merit switching if what is offered today is withdrawn tomorrow. We don’t need the hassle of continually switching.

Absolutely the nub of the problem. A momentary win on one account until another beats it …..

We’d been with Lloyds for 40 plus years. We do feel a certain loyalty. We’d stuck with them even during the awful late 90s and early noughties when they were attempting to digest TSB and their service was diabolical. Then they left us high and dry in our town by closing the branch due to their contretemps with Europe. We bank online but would never use a bank that didn’t have a branch on the high street where we can go and rant if necessary. We switched to TSB. No complaints. First class!

I’m happier with a Building Society.
Banks have let me down in the past and I just have no faith in them.
They should be forced to contact all their past customers who have had PPI’s with them and make them pay those customers for those mis-sold PPI’s.

It is disgraceful that money grabbing companies are being allowed to do the job for them and taking a massive 30% + vat into the bargain. It looks like a cartel, as these companies could well be in cahoots with the Banks and paying them backhanders, who knows? How else do they get their information? It would also stop all those nuisance phone calls too!

grizz says:
23 October 2015

I agree with Antony Booth. Its time banks started sharing the profits with the people who put in the money.

I was with barclays for 71 years yes 71 . I switched last year. Barclays made no attempt to contact me or try to retain my account. Over my life I had paid them very many thousands They had both buisness account and private. I like most folk, but bankers are about as low as you can get just above insurance companys.

Steve lloyd says:
23 October 2015

I have been with Santader bank and hold a 123 current account
It gives me a good rate of interest based on the funds within the account
The account fee is increasing in 2016 from £2 to £5 but this account is still one of the best in the banking industry. I am aware of some investors who use the 123 account as a saving account because the 3% interest rate before tax is more attractive than an alternative saving account

Niky says:
23 October 2015

I have banked with Nationwide for over 40 years and I am extremely happy with the service I get from them and have no desire to switch to another bank! I have switched between Nationwide current accounts and presently have a Flexplus packaged account which suits my needs very well. My husband and 3 adult children also bank with Nationwide and are happy to stay too. I feel there is too much pressure on people to “switch” – why bother when one is getting an excellent deal with a current provider? Please Which? do not keep pushing people into this switching – it really does not suit everyone!!

Tatto Couligian says:
23 October 2015

The main problem in banking as well as many other industries is the lack of real competition.
As companies get bigger by takeovers and mergers, and globalisation spreads, competition gets less – heading towards a monopoly situation.

I was with the same bank (TSB then Lloyds from the takeover) from my early days and never had a problem. However I had a maturing Bond and needed to put it somewhere, so ‘switched’ my current account to Santander 123 for the interest. Very easy to do and I’ve not regretted it. Disappointed they are putting up their charge, but it’s still worth my while, and if I ever change banks again it will probably be back to TSB, where I started – more years ago than I care to think about !

I switched a business where I am the Company Secretary from Lloyds TSB to Santander. It was chaos. An example: Santander said that I had to nothing to do re existing standing orders they would ensure they were all transferred and all set up properly. What actually happened was that TSB Lloyds continued to pay some but not all of them and Santander paid some but not all of them and usually the ones TSB Lloyds had already paid. They wouldn’t talk to each other. They kept blaming each other. It caused me a massive headache and a serious cashflow problem. We were lucky to not go under. A couple of years after this switch I had a major issue with Santander who refused to take responsibility for cash paid in to their agent – The Post Office – which was lost. I took them to the Ombudsman and won but the compensation was paltry. I’d have liked to move from Santander but couldn’t face the hassle. Banks are OK when everything is routine. It’s the same with the Energy companies.

I have been with my current bank, First Direct, since they first launched and of course I know that other banks offer a better deal by, for example, paying interest on a current account but my bank has always managed my account very efficiently and their UK based and friendly staff have always very quickly sorted out any issues should they arise. I fear switching to another bank in case their service falls short and then saving a few quid, to me, quickly gets offset by the aggravation of poor service. I also have an account with a very large Spanish bank, they have very poor service and have so many different charges for anything and everything that they make UK banks look like charities !

While I continue to get good service and on-line banking that seems as secure as any (and more secure than some I have looked at), the only reason to move would be if they paid me. Some do, but they are only for a limited period and/or limited amounts and as I can (and do) readily transfer funds to and from interest paying savings accounts, it is not a significant disadvantage. I am also familiar with their accounts, processes, security systems, charges and so on.
What might get me to consider changing is if a bank automatically put your funds into their account that paid the highest rate of interest, but yet to find one that does that !

For me the main issue with switching is where to? They are all pretty much the same. Where I live Nat West has closed, the Post Office is gone leaving only Lloyds three days a week (and looking threatened). The two nearest towns (30+ minutes by car) are in a similar situation. The banks claim more people are banking online so they don’t need local branches, in reality they are forcing us to do it online as it is cheaper for them. Trouble is how do I pay cash/cheques in via the computer? As one person said earlier we don’t all live in cities with huge choices.

I do agree that there’s not enough competition and that the four “Big Banks” monopolise the market otherwise by now there would have been at least “one new Bank” taking their ground.
Customer Service is getting poorer and poorer: half an hour or longer on the phone waiting to talk
to a Bank Rep has become the norm. The Elderly are heavily (I’m getting there) penalised
as Banks rely more and more – if not only – on the internet to operate. Discriminatory!?
Also there should be a list of automatic fees credited to our Accounts for poor Service and Bank shortcomings, matching those we are charged when we are at fault. There are plenty of very clear cases:
*failing to cancel or amend a direct debit *closing an Account by mistake etc.
Customers should not have to go through a painstaking and time consuming Complaint process – forced to listen to hours of appalling music through the phone – in order to be rewarded £25 which will be credited
to their Accounts within “the next ten days”.
Banks have not changed of their own volition. They are still Big Bullies dictating Terrible Terms of engagement. But I am certain that the Old Bad Boys are still pulling the strings, “undercover”.

I have just gone over my overdraft limit. I went over because the bank charged me £40 bank charges, otherwise I would not have gone over. This could just be coincidence except that it has now happened four times like this. I agreed a £6000 overdraft this year because I have had to have many things done in my new house such as New bathroom and kitchen double glazing etc. Every month the bank charges me for various things that regularly take my charges every month to over £100. Surely just to have an overdraft that the bank agreed with me should not cost in excess of £100 every month. I have talked to several customer service people at the bank and they each say that seems quite a lot, yet they just say do I want to speak to advisors who will help me manage my money better. I do not want this as I handle all my money as efficiently as I can. I want them to lower it. Just one last thought, it is ironic and irritating to be advised on prudence with money by a bank that was one of the banks that brought the country to its knees and had to be bailed out. I didn’t notice anyone charging them excessive charges for mishandling our money. As a tax payer I still own 40% of this bank and yet they chastise me financially for having too much of my own money!

A typical bank’s charges for an authorised overdraft might be 18.9% EAR. I calculate on a £6000 overdraft if used for a year the interest would be around £1130, or £94.50 a month. If the interest is not repaid monthly and increases your overdraft above the agreed limit I assume this may incur an unauthorised overdraft usage fee. This would account for the extra charges.

It might be cheaper to take out a loan from your bank rather than an overdraft.

I would have thought it worth talking to a bank advisor to see what the best solution was. However you sound as though you’ve thought all this through but it would be interesting to know exactly how the charges are incurred.

Iceland has jailed, as of this week, 26 bankers for their part in destroying the Icelandic economy.

The figure for the US I believe is zero and the UK just a smidgen more.

I have good information on the reasons for the collapse of the major UK Banks and a large part is done to the light regulation so popular under Tony Blair and George Brown. Secondly the Bank Boards were weak and their executives driven by greed and bragging rights. A problem scenario even with charities.

Thirdly the actual structure of some banks and building societies was completely wrong in that the final lending decision was given to the lenders rather than a prudent risk department. The exception was Lloyds who for years were known in the industry as the cautious fuddyduddy Bank. George Brown and the City conspired to get it to takeover HBOS and knacker itself in the process.

I could go into far greater detail but the bottom line is that weak Government and weak Boards, and no personal liability for those at the top all made for a mess. The recovery has also been screwed by using the Banks to channel money that could have been more directly utilised.

I’ve been now for 15 months with Santander and I’m quite happy with the monthly interest I’m getting from my 1 2 3 Account.

Iceland has jailed, as of this week, 26 bankers for their part in destroying the Icelandic economy.

Interesting. I think the US did jail one or two, but not the many that were culpable.

I have been with the same Bank some 55 years mainly using a current account initially to accept salary credits and later pension credits. I have watched the introduction of Santander into the banking scene first with envy but with reluctance to trust the newcomer. Howevever watching the scene I found my “Own 55 year” Bank had current accounts giving interests so I started 2 or 3 new current accounts each giving interest subject to certain conditions (i.e. interest on balances up to prescribed limits.)
Whilst these do not appear to give interest as good as those of Santander I would need something more to get me to change Banks. One sould look at accounts available within ones own Bank before taking any switching decisions.

It seems the US hasn’t, in fact, jailed a single banker. Excellent aerticle about it here:

http:// usuncut.com/world/iceland-sentences-26-bankers-to-a-combined-74-years-in-prison/

Asked how Iceland managed to recover from the global financial disaster, Iceland’s President, Olafur Ragnar Grimmson, famously replied,

“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.”