New banks slam watchdog CMA for missing 'golden opportunity' after weak reforms

The competition watchdog was today accused of missing a “golden opportunity” to open up the banking industry to new competition and helping consumers save money.

A two-year £5 million report from the Competition and Markets Authority ordered banks to set up a single digital app to allow customers to share private data about themselves with rival banks they might switch to.

Apart from that, the CMA added little to its list of recommendations made in May, which included text alerts when people go overdrawn and capped charges for overdrafts.

“The CMA was given a rare opportunity to support and develop competition in banking,” said Craig Donaldson, chief executive of Metro Bank. “It is disappointing that they decided not to get at the root of the problem, but rather they missed the point and tinkered around the edges.”

“We think there is still a long way to go to deliver greater competition and give customers a better deal,” said Jayne-Anne Gadhia (pictured), chief executive of Virgin Money.

Challenger banks are calling for the rules on how much capital they must hold against lending to be lowered.

They argue they have fewer legacy issues and less-risky business models than the big four, who have more than 70% of the current-account market.

They make £1.2 billion a year from unarranged overdrafts, according to the CMA. “Disproportionate capital requirements are anti-competitive and unduly support the large incumbent banks by allowing them to hold up to 10 times less capital for the same loans than challenger banks,” said Donaldson.

Even the banking lobby group, the BBA, while welcoming much of the report, questioned whether it had done enough for challengers.

“We recognise more work needs to be done to create a level playing field by supporting new banks wanting to set up business, as well as helping to grow established banks,” Anthony Browne, chief executive said. Mark Mullen, chief executive of the “mobile-first” challenger Atom Bank, criticised the way in which the CMA has told the big banks to police the changes it wants. He said: “It’s like trusting a pyromaniac with the security for a fireworks party. It means that the new banks like Atom will have little direct say in shaping the future.”