Sometimes I wish the authorities had taken the banking industry outside after the financial crisis and had it shot. Better a quick bullet than the slow drip of regulatory death the sector has been subject to.
Instead of putting Barclays (LSE: BARC), HSBC Holdings (LSE: HSBA), Lloyds Banking Group (LSE: LLOY) and Royal Bank of Scotland Group (LSE: RBS) out of their misery, they have put them on the rack instead.
An endless string of increasingly inflated fines for rate rigging and mis-selling, mostly deserved, but some mere power grabs from bully boys in the US, has been torture for investors.
And there is plenty more of this to come, with the lucrative UK current account market next to face the lash.
Clear and Current Danger
Few can have been surprised by yesterday’s decision by the Competition & Markets Authority (CMA) to call for a full-blown investigation into the big four’s role in the personal current and small business account market.
With an unhealthily large 77% share of the market, the banks were always vulnerable. Current accounts were the most complained about product in the first six months of 2014, after PPI, according to the Financial Conduct Authority.
It received a total of 319,505 complaints in the first six months of this year, up 11% year-on-year.
In this climate, the CMA was hardly likely to give the banks a clean bill of health.
 Yet I’m not convinced that consumers are so worked up about the apparent stranglehold of the big four. They are already free to switch elsewhere, and 1.2 million have done so, simply since The Payments Council launched its seven-day switching service one year ago.
But many are switching to grab high introductory interest rate offers, while continuing to run their old accounts.
Consumers may get worked up if the CMA demands the end to ‘free’ banking, which most people love.
Challenging Times
Nevertheless, the banks are now trading under the threat of being forced to break up by the CMA. The shadow could hang over them until May 2016, when the investigation will report.
Politicians from Ed Balls to Vince Cable know there are votes to be won from bashing the bankers, and with a host of challengers lining up to cash in, including M&S, Tesco, TSB, Virgin and more, the big four will come under increasing pressure.
Fine Times
Retribution for the big banks has been slow in coming, but is grinding surely on. Ace dividend investor Neil Woodford has already bailed out, citing regulatory “fine inflation”.
The banking sector still holds great opportunities for investors, especially at today’s reduced valuations, but investors must brace themselves for plenty more torture.