The Competition and Markets Authority (CMA) had three options. The first was the radical one of breaking up the big banks on the grounds that nothing less would address the “striking” stability in market shares over time. The second route was the imaginative idea of abolishing “free” in-credit banking, thereby exposing the rotten rates for savers and, perhaps, encouraging punters to shop around. The third was a technocratic fiddle to try to tell customers what they’re missing.
To the surprise of almost nobody, the CMA chose the third – a tickle. It used different language, of course. Alasdair Smith, the panel chairman, thinks the measures will have “a far-reaching impact on how banks operate and will empower account holders to search for and switch to the account that suits them best”.
Good luck with that. The evidence of a couple of decades suggests most bank customers require more than nudges and prompts before they move their custom. The CMA is placing a lot of faith in Midata, a government tool that allows people to compare accounts based on their own banking data. If Midata is the answer, it requires a serious upgrade. Smith confessed that none of his five-strong panel had heard of the service before they started their investigations.
Would the other options have been better? Abolishing “free” in-credit banking was a nonstarter. Parliament will never pass a law to make banks raise the price of their core product.
The breakup option is the most attractive in theory. It is maddening, for example, to hear Lloyds Banking Group, the market leader, describe Halifax as its “challenger” brand; a challenge from a business you own isn’t real competition. Yet it is also true that the limited disposals undertaken on the orders of Brussels – the liberation of TSB from Lloyds, and Williams & Glyn from Royal Bank of Scotland – have been expensive, time-consuming and not obviously desired by customers.
The depressing truth is that past consolidation should never have happened. RBS’s purchase of NatWest in 2000 was a mistake, as was Lloyds’ acquisition of HBOS in 2009. For the latter, the last Labour government told us to hold our noses in the midst of the banking crisis and think of the national interest. We’re still holding them. Lloyds, note, was firmly in the sinners’ quadrant in an interesting graph in the CMA report – the one labelled “above-average prices and below-average quality”.
The CMA’s suggestions won’t do any harm and, at the margin, smarter use of online comparison sites might help. But the British Chambers of Commerce, whose members are more exposed than personal account customers to the banking oligopoly, had the right view on this underwhelming report: “The CMA is effectively endorsing a status quo that many businesses find unacceptable.”
‘Radical’ Labour goes easy on banks
Still on the CMA report, you might have thought the Labour party – the one under supposedly radical new leadership – could have summoned some blood and thunder. Remember, pressure from former leader Ed Miliband virtually prompted the inquiry, and former shadow chancellor Ed Balls was clear on what he wanted – two new challenger banks and a market share test.
John McDonnell, Balls’s successor, is less demanding: “We welcome the report by the CMA and support many of their recommendations around more transparency for customers. It is now up to the government to reflect carefully on these provisional findings.” How mellow.
Infinis Energy blown off course by the Tories
Farewell, Infinis Energy, we hardly knew you. Guy Hands brought the operator of onshore wind farms to the stock market in 2003 at 260p a share, retaining a 68% stake for his Terra Firma private equity outfit. Now he’s taking it private again at 185p. Should outside investors feel minced in Hands’s turbines?
No. In fact, they’re probably grateful for his generosity in paying a 40% premium to the share price on Wednesday. Infinis, sadly, has been hit by two factors beyond its control – low wholesale power prices and the government’s withdrawal of subsidies from renewables.
Its chairman, Ian Marchant, reckons the split is two-thirds/one-third, but he is right to rant about the government’s “crass” actions. The Tories’ manifesto spoke of wind subsidies going over the lifetime of the parliament, but the process took about “five weeks rather than five years”.
Onshore wind is not to everybody’s taste but it is cheaper than nuclear and ought to have a place within a sensible planning regime. Instead, Infinis is yet another promising British business crowded out by the government’s baffling fanaticism for foreign-funded nuclear technology that only ever becomes more expensive.
