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Consumers ‘deserve better from high street banks’

Consumers ‘deserve better from high street banks’

Category: Banking

Updated: 14/12/2012
First Published: 04/07/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

People deserve better from high street banks, the Financial Services Authority's consumer panel has said.
The criticism came as the Financial Services Consumer Panel made its latest response to the Independent Commission on Banking.

Announced last month, the Commission has been asked to consider changes that can be made to the UK 's retail banking sector to promote stability and competition, and will make recommendations in September.

The Panel has called for:

  • Removal of barriers to entry and a wide choice of providers;
  • Ease of switching;
  • Greater transparency about products and prices and easy comparisons;
  • Access to financial services for all.

"Consumers deserve better from the high street banks," said Kay Blair, vice chair of the Consumer Panel.

"There is far too little effective competition leaving consumers with a range of nearly identical products which are difficult to compare directly and have hidden costs and charges.

"The second tier of the banking industry has effectively been wiped out by building society demutualisation and industry consolidation.

"It is essential that competition in the market is enhanced, and that new entrants are able to raise standards and push the industry into delivering better outcomes for consumers."

The banks have also come under fire from business representatives.

The Federation of Small Businesses (FSB) has said that more firms than ever are looking to borrow money, but that many are having their requests for credit turned down.

Under Project Merlin, banks have been set a lending target of £76 billion to small and medium-sized firms in 2011.

It means that an average of £19 billion will have to be lent each quarter – more than the £16.8 billion achieved in the first quarter of the year.

The FSB insists that the shortfall is not down to a lack of appetite from businesses.

Figures show that 20% of FSB members have approached the banks for credit.

Of those, a third (33%) have been refused - that is the equivalent of 320,000 businesses in the last year that are not getting the credit they need.

"Experience shows that demand for credit is at its highest when the economy starts to enter a recovery period," said John Walker, national chairman of the organisation.

"Our survey work is indicating that businesses are starting to think about expanding or buying new machinery and it is really disappointing that firms are having to abandon these plans because of the banks refusing to lend."

"The Office for Budget Responsibility is forecasting that business investment will help to strengthen the recovery."

"This will not happen unless the banks work with businesses to ensure that they can get the finance they so greatly need. If this does not to happen we risk the recovery remaining in a stagnant position and never fully recovering."

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