Adam Posen criticises competition in the UK banking sector

Adam Posen, a member of the MPC, has today stepped into the public domain to criticise competition in the UK banking arena at a time when businesses and consumers are crying out for more liquidity. While he appreciates that the UK is probably ahead of the EU and even the US in terms of tackling various banking problems, he believes that the fact that five major banks in the UK control the vast majority of the market has led to a reduction in short-term competition.

This is a fear which many people have had over the last few months as regulatory costs and the burden of financial backing for the banking arena continues to grow. There is concern that not all independent financial companies will be able to take on these extra costs and we could see various mergers and takeovers which would reduce the number of components in the UK financial sector and ultimately reduce competition.

The last couple of years have shown how difficult to control and how complicated the UK banking arena has become and how a relatively small number of companies control the majority of the marketplace. However, by increasing regulatory costs and the financial liquidity required to trade, in many ways competition is also being reduced and the number of companies trading in the UK financial arena is almost certain to fall.