MPs have called for the government and the Competition and Markets Authority (CMA) to re-examine the break-up and demerger of major banks to drive competition.

A report by the All-Party Parliamentary Group (APPG) on Challenger Banks and Building Societies, which has taken three years to compile, found that there is a “lack of competition in the sector being enforced by a one-size-fits-all regulatory system.”

The research revealed that new start-ups are facing the same regulatory burden as established banks and found that the UK’s regulatory system contains institutional bias towards major banks which is stifling competition.

The APPG also recommended the government put a greater focus on competition in banking regulation to ensure new firms can enter the market.

Karen Bradley MP commented on the findings: “The introduction of the UK Financial Services Bill is very welcome, as is the Government’s admission that it will be the first of many. This legislation is focussed on delivering the Government’s commitments over international rules such as Basel III and putting EU legislation into UK law ahead of Brexit. There will also be benefits to consumers and UK firms from the Government’s approach.

“However, given the importance of the financial services sector to the UK economy, and the systemic challenges faced in the UK, the Government needs to go further. More than a decade on from the 2008 financial crash, there is still far too little competition in the UK banking sector. Despite being bailed out at huge public expense, consumer banking in the UK continues to be dominated by the same small cabal of firms deemed too big to fail.

“While there are some new entrants to the market, the current regulatory structure makes it impossible for them to compete with the larger players. The UK regulatory system needs to create a viable pathway for start-ups to challenge the established High Street banks.”

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