Bank reforms do not go far enough, say challenger rivals

Bank customers could save £1 billion in five years under new rules put forward by the competition watchdog but challenger banks and business leaders immediately accused it of not going far enough.

The Competition and Markets Authority outlined a range of measures including capped charges on unauthorised overdrafts, text alerts when customers go overdrawn, even easier switching and much more transparent pricing for personal current accounts.

On SME banking it wants to see more businesses being able to borrow more cheaply from banks other than those that run their current accounts.

It wants much greater transparency on pricing so that SMEs can shop around.

Alasdair Smith, chair of the retail banking investigation, said: “For too long, banks have been able to sit back and not work hard enough for their personal and small business customers. We believe the strong and innovative package of measures we are proposing will give customers the information and tools they really need to get a better deal out of the banks.”

But Paul Pester of TSB, the challenger bank bought by Spain’s Sabadell, said: “The CMA has missed a golden opportunity and is on its way to short-changing millions of Brits by failing to go far enough in its measures to break the stranglehold of the ‘Big Five’.

“The reform consumers so desperately need is at risk of being kicked into the long grass. Without a monthly bill, consumers remain in the dark and banking remains the only major industry refusing to be transparent about the cost of banking. Consumers need to know how much they’re paying for their banking and be able to work out how to get a better deal.”

On the SME front, Adam Marshall, acting director general of the British Chambers of Commerce, said: “The CMA remains in danger of passing up a golden opportunity to deliver more fundamental changes to the business finance market. There are deep-rooted problems in SME finance. Many will feel that the CMA’s overall package of remedies only incrementally shifts the status quo.”