The OFT has today launched a review of barriers to entry, expansion and exit in retail banking in order to identify any obstacles facing new entrants and smaller banks seeking to expand.
The OFT is calling for evidence on the extent of any barriers affecting banking for personal customers and SMEs. An OFT paper also published today sets out the scope of the OFT's review and identifies the nature of the information being sought. The OFT's press release and paper can be found here .
The review is motivated principally by the significant changes to the UK banking sector brought about by the global financial crisis. The OFT is undertaking this review to be better informed as to the dynamics of the personal and SME banking market and how the market may develop in the future. It will assist the OFT and other Government departments in assessing and advising on regulatory changes in the banking sector, the assessment of mergers and for determining future work priorities in retail banking.
The review will focus on four areas:
- Regulatory requirements including obtaining FSA authorisation and capital and liquidity requirements;
- Essential inputs which covers access to specific infrastructure, most importantly payment systems and access to credit risk information;
- Barriers to achieving scale such as customer inertia, the cost of customer acquisition, the cost of setting up branch networks and the value of an established brand or reputation;
- Barriers to exit which includes aspects of the operation of the Special Resolution Scheme set up to assist in the orderly exit of firms in the banking sector.
Whilst the OFT invites submissions which should be sent to the OFT by 8 July 2010, the OFT will also be sending specific information requests to various parties as well as holding meetings testing the evidence it receives. The findings from the review are due to be published in Autumn 2010.
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The original publication date for this article was 26/05/2010.
