The UK banking sector is dominated by a few very large banks, including Barclays, the Royal Bank of Scotland (RBS), and HBOS. In term of the value of assets, the market is clearly oligopolistic.
In response to the credit crunch, the UK banking sector has accelerated the process of integration. In January 2009 the Halifax Bank of Scotland (HBOS) merged with Lloyds TBS to create the Lloyds Group.
In 2002 the Competition Commission concluded that a number of the largest banks operated a complex monopoly in the supply of services to small and medium sized enterprises (SMEs) which resulted in reduced competition to the detriment of the customers. For example, customers were reluctant to switch banks because they all offered very similar benefits.
Following the financial crisis the banking industry increased its level of concentration. The banking H-H Index rose from 1401 in 2007 to 1736 in 2010 (an index score of 2000 is regarded as highly concentrated.)
As with US and EU banks, UK banks are now subject to much tighter regulation. Regulators must balance the need for financial stability and for ensuring that banks can pass any stress test they are faced with, as well as ensure that financial markets remain competitive. In the UK, the Financial Conduct Authority (FCA)is responsible for ensuring that financial markets work fairly.