Based on responses to a July consultation the CMA will look into the effectiveness of competition between major banks, addressing concerns about the low levels of current account switching, difficulties in comparing current accounts, barriers to entry and the lack of movement in the market share of the ‘big four’ banks. These banks – including Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland – provide more than three quarters of personal and business accounts.

Alex Chisholm, CMA chief executive, said: “After carefully considering the consultation responses, most of which supported a market investigation, we remain of the view that there should be a full market investigation into the sector, conducted by a Market Reference Group drawn from the CMA’s expert panel of independent CMA members.”

The group, which has yet to be appointed, will publish a timeline for the investigation shortly.

Chisholm added: “Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.”

According to Barclays the investigation is”not appropriate at this time”. In a response to the CMA’s consultation the bank said: “Various developments, innovations and stimuli are changing the competitive landscape… and these must be given time to mature.”

Barclays went on to argue that there has been “substantial” new entry to the banking sector in recent years and that low switching levels do not necessarily indicate the absence of competition, pointing out that consumer awareness of and confidence in new Current Account Switching rules are high.

Craig Donaldson, CEO of challenger bank Metro Bank, said: “No market where such a small number of players hold such a large percentage of the market share should be described as efficient or competitive.

We need a level playing field in banking, where all banks can compete in a transparent and innovative market. Without a level playing field, innovation and competition are stifled, and consumer choice will continue to be limited. We applaud the CMA for recognising this, and look forward to assisting them with their investigations.”