HSBC, Barclays and other UK banks face break-up threat as competition probe launched

LONDON - Britain's big banks could be broken up after the country's competition watchdog launched an in-depth investigation into services for small business customers and personal accounts because of a lack of competition.

It marks the latest step by authorities to break the dominance of the country's big four lenders and is likely to keep the industry in the political spotlight ahead of next year's election and beyond.

The Competition and Markets Authority (CMA) said on Thursday banks had not done enough to meet the needs of retail customers or small and medium-sized businesses, such as making it easier to switch banks or providing clear information on fees.

The investigation, which may take until summer 2016 to complete, had been expected after the CMA said in July a full investigation was on the cards.

The CMA, which became Britain's new competition watchdog in April, has the power to order a break up of banks considered too dominant, as well as so-called behavioural remedies, such as improving information given to customers.

Britain's big four lenders - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC - have about 77 per cent of the 65 million personal current accounts in Britain. They also have 85 per cent of the 3.5 million business current accounts and provide nine out of every 10 business loans, the CMA said.

UK authorities have been trying to increase competition in business banking for 15 years, but have failed to do so.

The CMA said there had been "very little movement over time in the market shares of the four largest banks", and it would review undertakings made by lenders in 2002 that were meant to open up competition in the small business space.

The CMA said it was concerned about low levels of customers shopping around and switching bank accounts; barriers to entry and expansion for smaller banks; and limited transparency making it difficult for customers to compare prices, especially for personal overdraft charges.

Analysts have said outcomes could include forcing banks to sell branches in areas where they are particularly strong. That could include business banking in Scotland, where RBS has 39 per cent of the market and Lloyds 30 per cent. The CMA will appoint a Market Reference Group - typically about five people - to investigate issues and decide what action to take.