Banking stocks rose on Tuesday as investors welcomed plans for a retail banking shake-up, although consumer groups branded them inadequate.
Shares in HSBC (LON:HSBA), Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) were all up as the Competition & Markets Authority (CMA) unveiled its recommendations after a nearly three-year long, £5mln review.
The watchdog launched the review amid concerns that the big four banks, which also include Barclays (LON:BARC), have a stranglehold over the market.
Campaigners for more competition had urged regulators to bring in measures such as allowing bank customers to keep their account numbers when they move between banks.
There were also calls to break up the big banks and end free in-credit banking to persuade people to switch.
But the CMA shied away from radical action, opting instead to give individuals and small businesses more information through channels such as price comparison websites.
The watchdog said it would impose a cap on monthly charges for unarranged overdrafts on personal current accounts.
“Customers may not even be aware of when they go into unarranged overdraft or realise the costs they are incurring, so the CMA also wants banks to alert people when they are going into unarranged overdraft, and give them time to avoid the charges,” a spokesman said.
It also vowed to make banks simplify their charging structures and to introduce technology to make it easier to transfer customer account details to rivals.
A consultation will take place until June 7 after which the CMA will publish a final report in August and implement its proposals by early 2017.
The British Bankers Association predictably welcomed the plans, saying they gave people more choice.
Chief executive Anthony Browne said: “The package of measures outlined in the provisional findings gives individual customers and businesses greater power to choose the product and services best for them.
“Capping monthly overdraft fees will help customers better manage their finances and raising awareness of the Current Account Switching Service will help more people realise they can switch accounts easily and quickly.”
The regulator wants people to be able to move more easily to challenger banks such as Secure Trust Bank PLC (LON:STB), Virgin Money Holdings (UK) PLC (LON:VM.), Aldermore Group PLC (LON:ALD), Shawbrook Group PLC (LON:SHAW) and Metro Bank PLC (LON:MTRO).
But consumer group Which? said banks should have made more information available years ago.
A Virgin Money spokesman said: "Forcing banks to cap overdraft penalties is a step in the right direction but there's nothing new in requiring increased transparency or improving switching processes.
"The status quo remains in favour of the big banks and that's not good for competition, innovation or the customer."
Metro Bank chief executive Craig Donaldson said: “Metro Bank welcomes the CMA’s investigation, but the provisional remedies still have a long way to go to create a truly competitive market.
“Together, the big four banks provide 70% of personal current accounts and an astonishing eight out of 10 business loans. Significantly more needs to be done to break their dominance."