Banks 'will change or break up'

17/02/12

By Steven Birch

Unless banks do more to stimulate competition within the savings sector, officials have warned they will take a "radical approach".

The Office of Fair Trading wants the process of switching banks to made even easier for customers, with banks issuing the "right prompts" to allow people to assess whether or not they should switch.

In 2011, the Independent Commission on Banking first flagged up the issue of switching account holders, suggesting a number of ways the process can be simplified.

But during a speech to bankers, OFT chief executive John Fingleton described how this is not enough and the prompts system is needed to boost this further.

He said: "It is not enough to make it easy to switch. Customers also need the right prompts to exercise their choice of provider.

"In banking markets consumers frequently face difficulties in understanding the true cost of running their account and comparing deals from alternative providers."

He added that the emergence of fresh banking options such as Tesco, Metro Bank and Virgin Money marked a "turning point", but suggested that unless "real change" is introduced then a forced break-up could be on the cards.

He explained that he is prepared to hand over the banking sector to the Competition Commission, warning that it could end up with a break up like airports operator BAA.