CMA market investigation of retail banking: update and outline of process

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On 6 November 2014, the Competition and Markets Authority (CMA) launched an in-depth investigation into both the personal current account sector and aspects of SME retail banking.

The principal concerns identified by the CMA are:

  • Low levels of customers shopping around and switching.
  • Limited transparency and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts.
  • Continuing barriers to entry and expansion, limiting the ability of smaller and newer providers to develop their business.
  • Very little movement over time in the market shares of the four largest banks, which provide over three-quarters of personal and business accounts.

The CMA aims to publish its final report in April 2016 and has announced a number of interim dates, including that it will publish relevant working papers and an annotated issues statement between March and June 2015 and that it will publish its provisional decision on remedies (if required) by January 2016 (the full timetable can be found here).

Issues statement

On 11 November 2014, the CMA published its issues statement. The issues statement, which provides a framework for the market investigation, is based on evidence the CMA has reviewed to date and sets out its initial hypotheses of what features, if any, of the supply of the retail banking services might give rise to an adverse effect on competition (AEC) and what might be the adverse outcomes of any such AEC(s).

The CMA has indentified three groups of high-level hypotheses, or “theories of harm”, that “may explain” how certain market characteristics (or combinations of characteristics) may be adversely affecting competition and leading to possible adverse outcomes:

  • Theory of harm 1: Impediments to customers’ ability to effectively shop around, choose and switch products or suppliers, resulting in weak incentives for banks to compete for customers on the basis of price, quality and/or innovation
  • Theory of harm 2: Concentration giving rise to market power of some banks leading to worse outcomes for customers
  • Theory of harm 3: Barriers to entry and expansion leading to worse outcomes for customers.

The CMA’s consultation on the issues statement closed on 3 December 2015 and the responses to this and initial submissions have been published on the CMA case page.

CMA update on the progress of the CMA banking market investigation

On 22 December 2014, the CMA published a short update on the progress of the banking market investigation.

Following on from its initial requests for standard off-the-shelf information, the CMA states that it has held a number of initial meetings and calls with relevant parties to discuss the process of the investigation and likely data and information gathering requirements. It has also been liaising closely with the Financial Conduct Authority, the Payment Systems Regulator and the Prudential Regulation Authority, as well as with various government departments.

The CMA is undertaking a number of case studies (of Atom Bank, Metro Bank, Nationwide Building Society, Tesco Bank, TSB Bank and Virgin Money) to better understand, in particular, barriers to entry and/or expansion faced by new and expanding market participants. In addition, during this month and February 2015, the CMA will be taking part in a number of site visits across the UK.

The CMA has also appointed GfK NOP Ltd to conduct a survey of personal current accounts, and will be requiring customer details from key parties for these purposes. The purpose of this research is to provide the CMA with a better understanding of the behaviour of personal current account customers.  The consultation on the outline design of the quantitative and qualitative work for the survey closed on 6 January 2015.

Outline of a CMA in-depth market investigation

A CMA market investigation is essentially a market-wide information gathering and analysis exercise to assess if/why a market is not operating well for consumers and what, if any, action can be taken to address concerns. Such an investigation usually is not targeted at specific operators in a sector and is not predicated on suspicion of wrongdoing – i.e. it is not a “breach of competition law” scenario, although breaches can be uncovered at the evidence gathering stage.  The inquiry will normally encompass the main players in a market and a number of smaller players.

In general terms, the structure of a market investigation consists of the information gathering, the analysis and the remedies phases. The amount of management time needed to meet the CMA’s requirements can vary greatly depending upon the size of the business in question and its presence in the market, and therefore the precise extent to which the CMA engages with the individual company. The information gathering process can be very extensive, however, even for smaller competitors. The CMA seeks to understand what barriers to entry and expansion may be faced by smaller players.

Information gathering

The information gathering process is initiated by the CMA issuing a “First Day Letter” (FDL) to the key operators in the relevant market. The FDL may require that the recipient submit certain pre-existing documentation to the CMA. It may also invite the recipient to attend an initial meeting with the CMA and to provide an initial written submission.

The CMA will, fairly early on, publish an “Issues List” describing the features of the market which potentially raise concerns.  This is an indication of the areas the CMA will focus on in its inquiry, although the Issues List can be amended at any time and normally is “Annotated” at a later stage by the CMA.

Even at this early stage, it is also open to smaller competitors to proactively contact the CMA and seek to influence the debate, if they so wish. Sometimes they may be expressly invited to do so by the CMA.

To gather more extensive and tailored information and data on the market, the CMA issues financial and market questionnaires to businesses, conducts consumer surveys and will typically conduct site visits to key businesses.


Once the CMA has collected sufficient information (which may include transactional and customer data as well as financial and board-level information relating to the individual businesses), it will hold formal hearings with key parties and will formulate its thinking as to the operation of the relevant market in a series of Working Papers, which it will publish. The core facts and issues set out in the Working Papers will then be presented in the CMA’s Provisional Findings. Market participants and other third parties (the Sector Regulator, consumer groups etc.) may respond to each of these papers.


Assuming the CMA finds an AEC, the final phase of the investigation centres around the formulation of and consultation on the CMA’s proposed and (ultimately) final remedies. These are remedies aimed at altering any elements of the relevant market structure, of market regulation or of the behaviour of competitors and/or customers in the market, which the CMA determines adversely affect competition. The CMA may hold a further round of formal hearings to discuss its Provisional Findings and proposed remedies.

At the conclusion of the investigation, the CMA publishes a Final Report, setting out its findings, the evidence on which it relies and remedies.

The CMA is normally required to conclude market investigations within 18 months of launch, with a further six months for implementation of remedies, though there are provisions for extension in complex cases.

Further information

Should you require further information or assistance regarding this inquiry, please contact Trudy Feaster-Gee, Partner (Barrister) and Head of Competition.