More competition - but more mergers less so

So Sarah Ferguson has turned her finances around spectacularly enough to be deemed suitable to advertise share dealer Charles Schwab. Most of us don't have Fergie's connections, or front, so if we want to revamp our finances we are stuck with a more mundane approach than the Duchess pursued (see lead feature).

At least, nowadays, because of increased competition, credit card debts can be tackled by a switch to a cheaper card. Intelligent Finance (IF), the Halifax subsidiary, calculates that UK consumers could save more than £2 billion a year by switching their cards to it from one of the 'big four'.

Independently, the Consumers' Association has calculated that we could save £4 million a day by shopping around for credit.

Admittedly competition has its downside, in that consumers are having some difficulty sorting the good from the bad. Enter Government plans for Catmarked cards. But competition is improving the deals available - not only for credit card borrowers, but also for current account customers, savers and mortgage borrowers.

There is still a long way to go, though and, sadly, competition is now under threat from the proposal by Lloyds TSB to take over Abbey National. The two would have well over a quarter of the current account market, a position that would contradict one of the main conclusions of the Government-commissioned report on banking, published last year by Don Cruickshank.

He said the big banks already had too great a stranglehold on current accounts.

Nevertheless, the City con sensus seems to be that competition watchdogs will have difficulty justifying a bar on such a tie-up. If the deal does go through, the very least that regulators can do is monitor closely the new scheme to make it easier for current account customers to switch banks.

The possibility of further major consolidation among banks should prompt some soul-searching about the shape of an industry that has such power over the fortunes of ordinary people. Just as competition is having an effect, it looks as though market forces will give the big boys an upper hand.

Mutuals are hanging in there to rival the banks, but they are becoming bogged down in disputes with both windfall hunters and members wanting more say (see page 24).

A report published last week by the Cambridge University Centre for Business Research says the mutuals face possible extinction unless legislation governing them is overhauled. Ministers should read it.