Cartels and competition in British banking: a back- ground study

Abstract

The work takes up the debate over competition in financial markets in Britain. It is mainly concerned with the issues involved in, and the origins of, existing constraints upon banking competition. It is argued that the problem is much wider than the relatively narrow one of banks’ restrictiveness. In particular, it is urged that Britain’s banking problems should be viewed in the context of financial markets, especially the long-term capital market, as a whole. The author first considers the relative decline of commercial banking and the traditional structural influences against competitiveness. Bank lending, the capital market, and official constraints are then examined before a history of restrictions on interest rate competition is provided. Finally, the relationship between bank competitiveness and the monetary authorities and the argument for cheap financing for business is assessed.

JEL: E44, G21, E52, E58