BRITAIN’S competition watchdog yesterday announced it would not rule out ordering a break-up of the “big four” banks as it set out plans for a full-scale inquiry of the sector.

The Competition and Markets Authority (CMA) found measures to open up the market, dominated by Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland, had not been effective enough.

It said key parts of banking lacked effective competition and failed to address the needs of personal consumers or small and medium-sized enterprises (SMEs).

The CMA announced a consultation over its provisional decision to launch a full-scale 18-month inquiry which could result in a series of reforms.

These potentially include enhancing information provided to customers, banning complex fees, capping overdraft charges and forcing banks to allow smaller rivals to use their branch networks or payment systems.

The CMA said going further and imposing so-called structural remedies such as forcing the break-up of banks could be expensive.

But it said the problems facing the sector were so serious and long-standing it “cannot rule out the possibility that structural remedies may be necessary.”

However, responding to the report, left economist Andrew Fisher, author of new book The Failed Experiment on the financial crash, called for the banks to be nationalised.

He said: “The UK banking sector suffers from a lack of public ownership, not a lack of competition. When the post-crash Northern Rock was finally nationalised in 2008, the full force of the business lobby was deployed to argue against Northern Rock being allowed to compete. So instead we nationalised the losses and privatised the profits.

“Instead of private competition, we need a diversity of democratically controlled finance institutions — from credit unions to mutuals and strategic public banks, operating regionally and nationally.”