With the Government attempting to defend RBS’s bank bonuses, Opposition Leader Ed Miliband is set to launch another attack on the UK’s banking sector. On Friday, Miliband is set to announce a study into whether limiting the market share of the big high street banks will encourage competition and give better deals to customers.
Labour’s thinking is that by capping the “big five” – HSBC, Barclays, Santander, Royal Bank of Scotland and Lloyds – this would enable smaller and new banks to challenge them. This, Labour says, will give customers a wider choice. Shadow Treasury chief secretary, Chris Leslie, said: “We have a situation now where a lot of customers feel, ‘What’s the point of switching, as they’re all the same?’”
These plans would lead to banks having to sell off high street branches, just as the Lloyds Banking Group are having to do now with 600 of their TSB ones. This is due to the conditions of the 2008 bailout and will mean no British bank has more than a 25% share of the retail market.
Labour aides have denied that Miliband has any intention to suggest an across-the-board 25% cap on a bank’s market share, but they refused to deny that a limit at a different level won’t be announced.
Mark Carney, the Governor of the Bank of England, has already spoken out against the idea of a market share cap. He has questioned whether such a thing, or a limit on bonuses, really addresses the problem. He said: “Just breaking up an institution doesn’t necessarily create a more intensive competitive structure.”
Former Chancellor and member of the Parliamentary Commission on Banking Standards also said there are “…probably enough domestic banks for there to be competition.”