Labour plans to refer high street banks to the competition authorities immediately if elected in 2015, the party leader is expected to say in a speech on banking reform.
The Guardian reports that Ed Miliband will say in a speech on Friday that he wants the proposed review by the Competition and Markets Authority (CMA) to complete within a year of the election, and anticipates it could lead to a breakup of the larger high street banks, such as RBS or Lloyds.
Mr Miliband is expected to argue that greater competition in financial services is central to restoring Britain's long-term economic prosperity and providing consumer choice.
The five biggest banks in the UK dominate the domestic market, with an 87% market share between them in 2012, according to Mintel data reported in the Financial Times.
In a speech this Friday, Ed Miliband is expected to call for them to sell off some branches to increase competition in the industry.
The 'Big Five' and their subsidiaries:
- HSBC - includes First Direct, M&S bank
- Barclays - includes Woolwich
- RBS - includes NatWest and Ulster Bank
- Lloyds - includes Halifax, Bank of Scotland, HBOS, TSB
- Santander - includes Abbey, Bradford & Bingley, Alliance and Leicester
In response to Ed Miliband's expected call to cap the size of UK banks in a speech this Friday, the Conservatives said the domination of the big five banks is "another problem" created by the Labour Government that Miliband 'was at the heart of'.
– Conservative Spokesman
Labour's failure to regulate the financial system led to the worst banking crash in our history, causing the worst recession in a century.
...That's why part of David Cameron's long-term economic plan is about fixing our banking system - by increasing competition on the high street, ring fencing retail from investment banking so that no bank is too big to fail, and increasing lending to business.
There is already greater choice on the high street now than there was under Labour.
The shadow business secretary Chuka Umuunna has confirmed the reports that Labour is to call for a cap on the size of British banks in an attempt to increase competition in the domestic market:
We're determined to reform banking so it better serves the real economy- a British Investment Bank and more competition in banking are key
It cannot be right that lending to almost 5 million UK businesses is concentrated in the hands of 5 High Street banks.
Ed Miliband is expected to propose a cap on the size of UK banks in a move to increase competition in the market.
The Telegraph reported that the Labour leader is set to outline the proposals in a speech this Friday and will suggest preventing any one bank from holding more than between 20% and 25% of the British banking market.