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Press releases 2010 -

OFT launches review of barriers to entry, expansion and exit in retail banking


55/10    26 May 2010

The OFT has today launched a review of barriers to entry, expansion and exit in retail banking, to identify any obstacles facing new entrants and smaller banks seeking to expand.

The global financial crisis has led to substantial change to the banking industry. Major banks have been recapitalised by the Government and consolidation has taken place. The crisis has also led to changes in financial regulation, with more changes imminent.

The extent of any barriers to entry, expansion and exit in retail banking will affect how the market now develops. Where new entry and expansion can occur quickly and efficiently, it is more likely that banks which fail to meet their customers' needs will lose market share in favour of those that can.

The OFT is calling for evidence on the extent of any barriers affecting banking for personal customers and for Small and Medium sized Enterprises (SMEs). A paper published today sets out the anticipated scope for the review and describes the type of information being sought.

The OFT is asking interested parties to comment on:

  • regulatory requirements including obtaining authorisation from the FSA and capital and liquidity requirements
  • essential inputs such as access to payment systems and availability of credit risk information
  • barriers to achieving scale such as developing branch networks and customer inertia
  • barriers to exit and aspects of the operation of the Special Resolution Regime.

The OFT is particularly interested in hearing from established providers, new entrants and potential new entrants to the sector, industry associations and organisations representing consumers and SME customers.

Clive Maxwell, the OFT's Senior Director for Services, said:

'The OFT is committed to encouraging competition within retail banking that benefits consumers through cheaper and better products or services.

'We have recently seen some new players enter retail banking and we want to understand whether there are any hurdles to this or to the expansion of smaller banks.'

The review covers all parts of the United Kingdom.

The call for evidence will run until 8 July 2010 and findings from the review are due to be published by the autumn of this year.


  1. The main retail banks provide over 125 million accounts, clear seven billion transactions a year and facilitate 2.3 billion cash withdrawals per year from their network of over 30,000 free ATMs: Source BBA website, top ten facts.
  2. Downnload Review of Barriers to Entry, Expansion and Exit in Retail Banking (pdf 321kb).
  3. Read the Review page and the Q&As.
  4. For the purposes of this review, Small and Medium sized Enterprises (SMEs) are defined as businesses with an annual turnover of less than £25 million.
  5. The review will also look specifically at any issues affecting barriers in Scotland and Northern Ireland to the extent that they have distinct banking markets from England and Wales.
  6. The review was announced earlier this year in the OFT's market study follow up report 'Personal Current Accounts in the UK - Unarranged overdrafts' (pdf 175kb).
  7. The Special Resolution Regime was established under the Banking Act 2009. Its aim is to provide tools to deal with banking institutions in financial difficulties to prevent disorderly failure and associated systemic risk.

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