The regulation of British retail banking utilities

The purpose of this paper is to consider in the light of the post August 2007 banking crises, how “fair” access to retail banking services for British households and small‐ and medium‐sized enterprises (SMEs) can be assured.

The current responsibility for assuring the bank customers are “treated fairly” belongs to the Financial Services Authority (FSA). The paper argues for the establishment of a banking commission to regulate retail banks as utilities, leaving the FSA to concentrate on prudential (“risk based”) supervision of bank and non‐bank financial institutions.

If access to payments services is infrastructural and access to finance is regarded as essential in a modern society, then retail banks should be regulated as utilities.

The banking crisis led to calls for banks to maintain lending to SMEs and households (especially mortgages). This implies that access to finance, like access to water and electricity, should be assured and that customers should be protected against the “monopoly” powers of large suppliers. Hence, retail banks are utilities and should be regulated as such.