The United Kingdom’s antitrust regulator said banks must set a cap on fees for customers who spend more than they have in their checking account following an almost two-year investigation into the retail banking industry.

The Competition and Markets Authority (CMA) recommended banks set their own limits on overdraft charges and a grace period for customers to avoid them, rather than have the fees “centrally regulated”, the watchdog said in a statement on Tuesday. In 2014, banks received £1.2 billion in revenue from the fees.

Better deal

“The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks,” said Alasdair Smith, chairman of the investigation.The report is the regulator’s second attempt at improving the banking services customers receive in a year. In October the CMA stopped far short of breaking up the banks or ending free current accounts, a decision criticised by politicians.

The latest proposals were dubbed too little, too late by consumer groups when the CMA published its provisional findings in May – a refrain that was repeated on Tuesday by smaller lenders.

Missed opportunity

“The CMA has played right into the hands of the big five banks and missed a golden opportunity to enable people across the UK to get a better deal from their banks,” said Paul Pester, chief executive officer of TSB Banking Group.

“The CMA’s report is only the first rung on the ladder and, while disappointing, it should not constrain the Government in its ambition to achieve a truly competitive banking market.”

The CMA also said it wanted banks to implement “Open Banking” by early 2018 – a package of measures that enables customers to manager accounts with multiple banks through one mobile app. The regulator also called for measures to help customers switch accounts between financial institutions. – (Bloomberg)