British banks will not be forced to ditch "free" banking for customers in credit in order to improve competition in the industry and will not be broken up, regulators said today.
The UK Competition and Markets Authority (CMA) instead recommended measures to make it easier to compare accounts, saying banks must make it easier for customers to switch to rival lenders.
UK regulators and lawmakers are keen to break the dominance of the country's biggest four lenders - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC.
These control more than three-quarters of current accounts and provide nine out of ten business loans in the UK.
The competition watchdog launched a review of the market for personal current accounts and small business banking services in November last year and is due to publish its final recommendations in May 2016.
The regulator decided against forcing banks to charge fees for customers who are in credit, saying it saw no convincing evidence that so-called free if-in-credit (FIIC) accounts distorted competition.
Some bankers had called for an end to this model, saying it contributed to scandals such as the mis-selling of loan insurance by encouraging banks to look for other ways to make money from customers.
The CMA also had the power to order a break-up of banks considered too dominant, but has decided against such a move.
The watchdog said it had identified a number of competition problems in both the personal current account (PCA) and small and medium-sized enterprise (SME) banking markets.
It said low levels of customer switching meant banks were not being put under enough competitive pressure, and new products and new banks did not attract customers quickly enough.
The CMA recommended banks prompt customers to review the services they receive, make it easier to compare products, create a new price comparison website for small firms, raise public awareness of how to switch accounts and share information more effectively to make it easier for small firms to shop around.
