Yesterday in Bournemouth the Chancellor unveiled his plans for reforming the banking sector. He concentrated on structural reforms to make the banking sector safer - and in particular safeguards to try to make it harder for the government to end up on the hook for a big bank - and all its risky investment business - going down.
Towards the end of the speech the Chancellor made mention of the issue of competition, or rather the lack of competition, in UK banking. I couldn't help myself thinking though that, once again, competition reform feels like a footnote to the real action on banking reform.
But it shouldn't be. For my mind, a lack of options both on the High Street and beyond is a major supply side factor holding back the flow of lending to the real economy and in particular the small business sector.
In case you need reminding of some key numbers, try these:
1 in the past 16 - quarters where net lending to UK businesses has been positive
85% - the share of business current accounts held by four banks in the UK
One third - Proportion of manufacturers saying viable investments are going unfunded because they have difficulty accessing the credit they need
The Chancellor made mention of Metro Bank, others talk about Handelsbanken, or Aldermore - new(ish) banks making inroads into the High Street. But these banks currently have branches numbering in the 10s or low 100s. The Project Verde deal, splitting off a ~5% market share from Lloyds covered 600+ branches.
Organic change is going to take decades to have an overall impact, even if these smaller banks were adding a branch a week.
It is encouraging to have the redirection service, supported by the Independent Commission on Banking, committed to by the government. By September, banks should be able to switch current account customers over within a week.
But it's not enough.
There have been multiple reviews of the state of competition in banking in the UK over the past 15 years - but definitive action still seems to be lacking. Indeed with respect to business current accounts, market concentration appears to have increased marginally in the last ten years.
We think that it needs to be easier for new banks to get through their necessary licensing arrangements with the FSA. It's fair enough that the authorities are gun-shy after the cowboy behaviour of recent years - but new challenger retail banks surely aren't where the balance of risk is coming from.
While the redirection service is a welcome improvement, we think full account number portability should be the aim. Customers are understandably cautious - perhaps moreso than in other sectors - about switching when essential payments depend on systems that have failed too often in the past.
Some in the financial sector might say that account number portability is too hard or that it's not done anywhere else. That seems a strange attitude indeed for a sector that has gone to extraordinary lengths to contort itself in increasingly byzantine financial innovation in search of new customers. Surely, with the right motivation, full account number portability could be cracked by the City.
There may also be a case for considering now whether at least the business current account market should be referred to the Competition Commission. We're not saying definitively that a referral should be made - but rather that the government should consider whether the sum of all its actions is going to add to meaningful enough change or whether a referral is needed.
For more details on these thoughts check out Finance for Growth.