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An investigation has been launched into personal current accounts and small business banking, and also into the market share of the four biggest UK banks.

The Competition and Markets Authority (CMA) first proposed the inquiry on 18 July, but it has only now given it the green light. The investigation is set to last for 18 months and will look into how major banks in the UK treat their customers, as well as seeing how difficult it is to switch between banks. It's also set to look at the lack of smaller competitors to the four big UK banks – Barclays, HSBC, RBS, and the Lloyds Banking Group – and how much of a market share they hold.

What could happen?

A few sources are already speculating that four big banks could be forced to be broken up – though this is fairly unlikely. This would mean that the banks could be split up into smaller networks which could theoretically encourage more competition, but the costs of such an operation would probably prove to be too much and could be passed on to consumers.

More likely is that banks could be forced to be more open about overdraft charges, and some are predicting that this could lead to the end of ‘free’ banking. At the moment, current accounts for the major banks are free to run but often come with add-on fees, such as for planned or unplanned overdrafts.

If banks are made to be more transparent about the kinds of fees which could apply to customers’ current accounts, they may decide it’s more competitive just to charge one flat rate. It could also mean that customers would be able to demand a better service if they paid for their bank accounts.

What are the alternatives?

If you can’t get a current account due to bad credit or even just prefer not to have an overdraft, all of the large providers offer basic bank accounts. These can accept people on lower incomes and often still offer a debit card, but can sometimes impose charges of up to £15 for unpaid transactions and usually won’t accept people who have been made bankrupt.

There are alternatives to bank accounts, such as the thinkmoney Current Account. This charges a single monthly fee, with no other costs for overdrafts or missed payments. It’s also suitable for people who have been made bankrupt or who have any other debt problems.

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