WIREDGOV

The Office of Fair Trading has recently launched a review of the personal current account market and outlined a longer term programme of work aimed at addressing competition concerns and a lack of customer focus across the wider retail banking market.

The personal current account review will seek to establish how the market has evolved since the OFT's market study in 2008. It will look at whether initiatives agreed by the OFT with banks have been successful at improving the switching process, increasing the transparency of personal current account charges and allowing people to manage their accounts more effectively.

The review forms part of a wider programme of work designed to achieve a more competitive and customer focused retail banking sector. As well as reviewing progress on current accounts, the OFT also intends over the next two years to consider the operation of payments systems and the banking market for small and medium-sized enterprises. It is also planning to look in more detail at the way in which consumers make decisions and engage with retail banking services, including through applying behavioural economics.

In September 2011, the Independent Commission on Banking recommended that the OFT consider making a market investigation reference to the Competition Commission by 2015 if it had not already done so, if sufficient improvements in the market have not been made by that time. The personal current account review and wider programme of work are aimed at informing the OFT's response to this recommendation, although a reference remains a possibility at any time if the legal test is met.

Claire Hart, OFT Director said:

'We committed to keeping the personal current account market under scrutiny following our 2008 study. Through this review we want to understand what progress banks have made in providing customers with better information about account charges, greater control over their accounts and easier account switching facilities.

'More generally, we are concerned that a lack of effective competition means the retail banking sector is not working in the interest of customers and businesses. We want to see banks become more customer-focused and this will be the central theme of our programme of work going forward.'

The OFT plans to publish its personal current account review by the end of 2012.

NOTES

1. See further details on the OFT's personal current account review and the OFT's work in retail banking in the UK.  
2. See the OFT's 2008 market study into the personal current account market. 
3. The OFT committed to carry out this review of the personal current account market in March 2010.
4. For details of the transparency and switching initiatives agreed with the banks, see press release Banks agree to make improvements to personal current account market in the UK (7 October 2009). Details on the initiatives regarding charges and customer control are available in the OFT's follow-up report on Unarranged overdrafts (pdf 632kb) in March 2010.
5. Clive Maxwell, who took over as OFT Chief Executive on 1 July, gave a speech on 20 June 2012 entitled Competition in financial services in which he set out a vision for a well functioning retail banking market. 
6. The OFT may make a market investigation reference to the Competition Commission under section 131 of the Enterprise Act 2002 if it has reasonable grounds for suspecting that one or more features of a market in the UK, alone or in combination, prevents, restricts or distorts competition in the UK or a part of the UK. The OFT will only make a reference in a case where this test is met if the OFT also considers that making a reference would be an appropriate exercise of its discretion. The criteria that the OFT will take into account in exercising its discretion are described in its guidance on Market Investigation References, OFT511 (pdf 1Mb).