Commenting on the announcement by the Competition and Markets Authority (CMA) today, Ms Lee Hopley, Chief Economist at EEF, the manufacturers’ organisation, said:
“Today’s announcement by the CMA has gone a good way towards alleviating concerns about the effectiveness of its original remedy package. The scale of intervention looked insufficient to move the needle in the access to finance space but the CMA has moved to beef up its behavioural remedies, while providing a clearer direction about the intended outcome and the steps needed to get there.
“While net lending for SMEs recently saw signs of life, moving into positive territory in 2015 for the first time since the crisis, and incumbent banks have upped their efforts to engage with customers, credit conditions for SMES continue to be constrained almost a decade since the financial meltdown. The CMA’s position that breaking up the big banks would be a disruptive process and that the creation of another traditional bank is unlikely to lead to different outcomes is the right one.
“However, lowering barriers to entry for challenger banks who differ from traditional banks in terms of asset specialisation and more personalised customer service could give some additional teeth to the CMA’s behavioural remedies. The CMA should reconsider the costs and benefits of acting in this space before the investigation’s conclusion this August.”