The Treasury Select Committee has criticised the Competition and Markets Authority (CMA) for its inquiry into the banking market, accusing the man leading the inquiry of being “lazy” and “passing the buck”.
Alasdair Smith, inquiry chair at the CMA, was repeatedly asked to say how much consumers actually pay for purportedly free bank accounts, with customers often foregoing credit interest.
While Smith knew how much his own account cost, he struggled to provide the MPs with any figures for other consumers.
Conservative MP and committee member Mark Garnier said the answers Smith was coming up with “appear to be lazy”.
“You haven’t challenged the banks to come up with the costs. You have had the wool pulled over your eyes,” he added.
The CMA has been studying the market to assess why so few customers switch banks, with a recent declaration that banks should encourage customers to switch to a rival whenever a special offer runs out, the customer racks up unauthorised overdraft charges or the bank’s systems crash for a while.
Garnier said: “You haven’t gone in to look at this in any proper way and you haven’t challenged banks to come up with a justification for their costs and to come back and answer the question, why do you not simply tell people how much you are being charged?”
MPs raised concerns that banks made money from customers without much money, who regularly go into their overdrafts and use those fees to subsidise accounts for better-off customers who do not need their overdraft.
Smith said it was very complex to work out the sums for different banks and different types of customer. Instead, he tried to focus on ways to make it easier for customers to find a better value account and move on.
SNP MP George Kerevan meanwhile, accused Smith of “passing the buck” for failing to investigate the anti-competitive effects of the big banks owning the payments system and charging smaller competitors to access the basic financial infrastructure.
Smith said the new Payments System Regulator should be the only watchdog to study that part of the industry.
He said that the CMA, which is due to reveal a final report next summer, would consider “all possible routes”.
Discussing the difficulties challenger banks feel they face, the CMA said it would work harder to address their concerns, such as the eight per cent corporation tax surcharge brought about by the Summer Budget – hitting banks with profits of more than £25m.
Smith said: “We will take our time and consider the evidence before making a decision on it… we will comment on whether the bank surcharge is a barrier to entry in our final report.”
If the CMA decided it was, “we’ll have some strong things to say about it” he concluded.
Sign up to our newsletter to get the latest from Business Advice.