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Office of Fair Trading set to monitor UK banking sector

As the UK government continues to tighten its grip on the UK banking sector it has received a stark warning from the Office of Fair Trading (OFT). The OFT has reiterated its earlier stance that the UK government must not be able to dictate and dominate the UK banking sector in the short to medium term.

Those who have followed the situation in the UK banking sector will be well aware that competition barriers were effectively removed in order to allow the Lloyds Bank/HBOS merger despite concerns that the merged entity would have undue influence over the sector. This was really a last ditch effort to save HBOS although subsequently both banks have been forced to go cap in hand to the UK government, resulting in an increase in the government's share of the enlarged entity.

The OFT is adamant that once the market is back on its feet these short-term concessions should be withdrawn allowing the sector to move back to a more competitive footing. The regulator is also wary of how and when the UK government will withdraw from the UK banking sector in the future in a manner which will not disrupt the market and also maintain a competitive edge.

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