Changes in UK Banking System

The past two years have seen an acceleration in the shifting market structure of the UK Banking system.
For the consumer it represents bad news. The market has become more concentrated leaving less choice. In particular the UK Bank market is becoming dominated by the Big Two Banks – Lloyds Group and Santander.

These are the Top banks in the UK

1. Lloyds Group – Lloyds TSB, Halifax, Bank of Scotland
2. Santander – Alliance & Leicester, Abbey, Bradford & Bingley.
3. HSBC
4. Barclays – Barclays and Woolwich
5. Royal Bank of Scotland (government have 65% stake)
6. Northern Rock (nationalised)
7. Standard Charter
8. Co-operative Bank

Abbey has seen a growth in market share during the credit crunch as its parent bank – Santander in Spain avoided the worst of the credit crunch. The impact is that Santander and Lloyds Group control over 50% of the Mortgage market in the UK.

Recently, the Mervyn King, governor of the Bank of England gave a speech warning about the dangers of creating banks too big to fail. Unfortunately, the credit crunch has created an almost duopoly in British Banking which threatens to restrict competition and lead to higher prices for consumers in the long term.

This week the cost of fixed rate mortgages increased by more than the forward cost of borrowing – an early sign of increased monopoly power by banks?

Top 10 British Banks (2008)