Challenger banks say Competition watchdog's banking review doesn't go far enough

Plans to shake up a current-accounts market dominated by the big four high street banks do not go far enough, the bosses of two of the main challenger banks have said.

The Competition & Markets Authority (CMA) set out plans to make switching current accounts easier, provide price-comparison websites for such accounts and to make banks prompt people to change if they suffered IT problems or changed interest rates.

But Jayne-Anne Gadhia, chief executive of Virgin Money, while welcoming the report, said customers were missing out on millions in interest payments.

She added: “It is estimated that interest foregone cost customers over £3 billion in 2013 and we would like to see all banks being required to pay net credit interest on current-account balances.

“If the CMA made the banks pay interest on current-account credit balances at a fair market rate it would drive a more level playing field and cause banks to more carefully consider the charges they make for current-account products and give customers a better deal.”

Paul Pester, chief executive of TSB, said: “The switching service needs to be improved for those who are trapped by their current provider and the provision of a standard format monthly bill that spells out the true cost of banking should be mandatory.

“Only then will we see customers being able to vote with their feet.”

But the CMA, which has until April to publish its so-called remedies and final report, defended itself against accusations it had let banks off the hook by not recommending the “nuclear” options of breaking up the banks or ordering the end of free current-account banking.

“I strongly disagree,” said Christiane Kent, project leader on the banking investigation.

“We looked hard at breaking up the banks but found that the real issue was around customer awareness and information, never mind the practical and cost implications of breaking up, which would ultimately be borne by consumers.