UK Banks not competitive

[Deleted User]

http://www.bbc.co.uk/news/business-12935228

Kohoutek

Retail banking in the UK is not competitive enough, a Commons Treasury Committee report has concluded.

It wasn't necessary to produce a Treasury Committee report to figure that one out...

vivatifosi

This is my favourite bit:

Mr Tyrie said: "The CEOs (chief executive officers) of the large incumbents told the committee UK retail banking was enormously competitive, but a far larger range of witnesses described the industry as close to an oligopoly."

It's textbook oligopoly! So much so that many textbooks use retail banking as an example of an oligopoly. The word oligopoly comes from the Greek oligoi meaning few. How many retail banks are they trying to suggest there are? No matter what banks do how can they possibly think they are anything else? It's so clear to see to anyone other than the CEOs. It's like a dog thinking it is a goldfish, it really is that absurd.

Thrugelmir

vivatifosi wrote: »

How many retail banks are they trying to suggest there are?

How many retail banks do we need?

michaels

On the other hand there was much greater competition a few years ago - didn't seem to do the average citizen much good in the long run...

vivatifosi

Thrugelmir wrote: »

How many retail banks do we need?

The issue to me Thrug is not how many we need, but the fact that demand for banking is such that we all need to use it unless we go off the grid. I don't have a problem with it being an oligopoly, there's no point in starting up a new bank, calling it First Direct and pretending it's a new competitor in the market. Some markets are naturally oligopolistic because of the type of market they are.

What I have an issue with is light touch regulation in an oligopolistic market that doesn't protect the consumers. This can any oligopolistic market, whether mobile phones, oil, whatever. I think the Basel controls are a move in the right direction, its just a shame that they came too late. Personally I blame the previous government every much as the banks for that. Any organisation is only going to work to its best advantage in the regulatory framework it is given. But denying a bank is an oligopoly, well that's a bit rich...

Degenerate

If competitiveness is defined by the number of participants in the market, then the long-term trend for consolidation in UK retail banking is obviously going to count negatively. This just goes to show that applying an over-simplistic methodology to measure competitiveness results in b*llocks conclusions.

If one looks at what banks in other developed countries offer their customers, then looks at our free banking, switching incentives and account switching services, one can only conclude that we get good value and competition is fierce.

vivatifosi

Degenerate wrote: »

If competitiveness is defined by the number of participants in the market, then the long-term trend for consolidation in UK retail banking is obviously going to count negatively. This just goes to show that applying an over-simplistic methodology to measure competitiveness results in b*llocks conclusions.

It's about the ability to be a price-setter in a market rather than a price taker. A small number of players is not the only detminant of that, a company can have first mover advantage, they may have resource advantages or other things their competitors don't have. But oligopolies are not perfect markets and we need to see them as such. That's why there are such high penalties for cartelling (eg BA/Virgin). Oligopolistic markets have the power invested in a relatively small number of players and the public do need a degree of protection against that. I don't for one minute say think that there aren't competitive banks, there are; nor that banks don't compete ferociously with each other, they probably do. Rather I'm saying they shouldn't deny being what they are: oligopolies.

We've got an interesting history as a country in dealing with less competitive markets. Take domestic energy for example. We have a greater choice of suppliers than in many countries, which is probably a good move, but they've all still managed to put their prices up in unison without being found guilty of cartelling. So energy may be more competitive than in other markets, but it still oligopolistic. We have to take the prices they set or go without. However I'd also argue that successive governments have failed to regulate the structure of the industry and make it invest in infrastructure, so we don't have the resources of other countries if - for argument's sake - Ukraine falls out with Russia again. It's that regulatory structure that we need to get right with banking.

Thrugelmir

Degenerate wrote: »

If competitiveness is defined by the number of participants in the market, then the long-term trend for consolidation in UK retail banking is obviously going to count negatively.

That was in part the reason for my initial comment. As once the demutualised building societies are discounted. The loss isn't huge in the past 30 years. RBS and BOS were Scottish based with few southern branches. Williams & Glyns was Scottish based as well. Which leaves the TSB which if I recall correctly was no 5 behind the then big 4. Midland, Lloyds, Barclays and Natwest. Since then Santander has built a large UK presence as well as the NW growing from a smaller base.

Loughton_Monkey

An oligopoly it may be.

But reading 'between the lines' in the article, it would be more pertinent to say "As a nation, the British are so dumbed down that very few of them have the brains or nous to understand basic financial principles and to shop around"

The conundrum would be if there were even more banks with even more products - people would almost need an IFA to find them a Cash ISA!