Office of Fair Trading (OFT) and Competition Commission

12. Since then the Office of Fair Trading (OFT) and Competition Commission (CC) have

conducted almost twenty inquiries into competition in different parts of the retail banking

market. Many of these inquiries and investigations have focused on particular segments of

the market, such as the personal current account market (2008), Cash ISAs (OFT, 2010)

store card credit services (OFT, 2004, CC, 2006). There have been two studies specifically

on SME banking, by the Competition Commission in 2002 and the Office of Fair Trading

in 2007. Most recently the OFT conducted a market study Review of barriers to entry,

expansion and exit in retail banking.8

There have also been a number of EU inquiries into

the banking sector, including the European Commission’s 2007 inquiry into retail banking.

The sheer number of inquiries and investigations suggests long–standing and widespread

concern about the effectiveness and nature of competition in the banking sector.

13. The market for retail banking is not like that for restaurant meals, groceries, clothes or

newspapers, where, as Lord Turner has noted, “the philosophy of free competition and free

customer choice easily produces good results”. In such markets the customer can assess the

quality and price of what is on offer and make an informed choice. In contrast, retail

banking sells many products such as long-term investment and insurance products which

are:

• long–term in nature, only revealing their quality many years hence;

• purchased only once or twice, thereby ruling out learning from repeat purchases;

• complex, which makes it difficult for consumers to assess.

Added to this—as in many other product markets—there is asymmetry of information and

knowledge between consumers and producers.

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