Britain's high street banks will come under attack again this week for their anti-competitive behaviour and poor level of service when an influential Government inquiry recommends tough new regulation.
As well as changes to the ways banks are policed, the Treasury Select Committee will propose radical ways to inject competition into the sector. These are likely to include recommending that the Financial Conduct Authority – the new consumer watchdog being created out of the Financial Services Authority – should take greater responsibility for looking at retail banking operations.
The committee has also come up with new ideas to enhance lending by the big retail banks to personal customers and small companies, more transparency on charges, terms and conditions, and ways to encourage new banks.
Prompted by the financial crisis, the Treasury committee, chaired by Tory MP Andrew Tyrie, has been investigating competition and choice in the banking industry for six-months. It was during the committee's hearings that Bob Diamond, the Barclays chief executive, said the time for remorse was over.
Part of the committee's remit was to study whether the financial crisis had led to a further concentration of power in the hands of the big banks – Barclays, Lloyds, Royal Bank of Scotland, HSBC and Santander – which between them control a huge chunk of retail banking.
Mr Tyrie, who has indicated he would support breaking up the partly state-owned banks, RBS and Lloyds, said: "Competition has been looked at many times over the past 20 years but there has been little progress. Our report will be robust and will have radical suggestions to improve banking."
Tory MP Andrea Leadsom, a committee member, is another fierce critic of the banks who will be publishing her own analysis of the industry later this week, with a paper for the Centre for Policy Studies entitled Boost Bank Competition, which looks at many of these issues in more detail.
Mrs Leadsom, a former Barclays director, said one way to create new banks would be to break-up those owned by UKFI, the Treasury arm which has stakes in RBS, Lloyds and Northern Rock. "It's extraordinary that there has been only one new banking license – to Metro Bank – in more than a 100 years. There are many ways we could improve competition, and help with the high cost to barriers of entry," she said. "First, Northern Rock should be mutalised instead of being sold." She added: "For example, we should look at whether the small business lending parts of RBS and Lloyds could be merged into a new bank, or whether RBS should be split into two.
"All options should be looked at including how to encourage new local credit unions or industry sectors to set up their own banks – like modern-day livery companies."
The select committee's report will be sent to Sir John Vickers, the chairman of the Independent Commission on Banking which is due to present its interim report on 11 April, when Parliament is in recess for Easter.
Labour MP Chuka Umunna, a committee member who tabled a parliamentary question on the timing of the presentation, said: "It's disgraceful that the Vickers report is being published in the holidays as this means it might not get the debate and public scrutiny it deserves."Reuse content