7 Conclusion
223. Our inquiry has led us to conclude that further
measures are required to promote competition in the retail banking
sector and ensure improved outcomes for consumers. Poor consumer
outcomes can be addressed by reducing barriers to entry and expansion
—in order to promote greater competition between existing
players and to encourage new entry. A focus on tackling concentration
without tackling these issues would do little to promote a more
competitive market. New and expanding entrants will only succeed
in growing in key markets, such as the current account and SME
markets, if impediments to their expansion—primarily problems
with switching and the lack of transparency and comparability—are
tackled.
224. New entry and reductions in barriers to entry
and expansion may alone prove insufficient to tackle the problem
of ineffective competition. As a result, we would urge the Independent
Commission on Banking to also seriously examine whether there
is a case for further structural reforms, over and above the RBS
and Lloyds Banking Group divestments, to reduce concentration
and promote competition. In particular, we call on the Commission
to ensure that the Government's need to maximise revenue from
the sale of the wholly or partly-state owned banks does not trump
the creation of a more competitive environment or a more resilient
banking sector. Indeed we believe that such a trade off does not
exist in the long run—maximising competition through the
divestments will ultimately bring longer-term economic benefits
to the UK through a higher overall GDP and subsequent higher tax
yield.
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