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* Competition watchdog could order bank break-ups
* Watchdog could order clearer pricing, comparisons
* TSB CEO says consolidation could boost competition (Adds comments from TSB Chief Executive)
By Matt Scuffham
LONDON, Feb 11 (Reuters) - Moves to improve competitionwithin Britain's banking industry have not yet had the desiredeffect, the head of the competition watchdog said, raising theprospect that the country's biggest banks could be broken up.
The Competition and Markets Authority (CMA) is investigatingthe market for personal current accounts and small businessbanking services and will decide what measures must be taken byMay 2016.
Its Chief Executive Alex Chisholm said in a submission toNew City Agenda, an independent political think tank, that theCMA could order banks to sell assets or tell them to provideclearer pricing and comparisons between different products.
Unlike previous investigations into the industry, the CMAhas the power to order banks to take actions rather than justmake recommendations, Chisholm said, and those actions may alsorequire changes to current laws and regulations.
Chisholm said moves to stimulate competition, includingensuring customers can switch banks in seven working days, hadnot had the desired effect.
"They don't seem to us yet to have had the transformativeeffect hoped for, and the long-standing concerns aboutcompetition in retail banking largely remain," he said.
Britain's biggest four banks -- Lloyds, Royal Bank ofScotland (RBS), Barclays and HSBC --control more than three quarters of current accounts and providenine out of 10 business loans.
Paul Pester, chief executive of new bank TSB, saidon Wednesday that medium-sized banks could merge to give themthe scale to compete with bigger rivals.
"It's a possibility," he told Reuters at an event inparliament organised by think tank New City Agenda. "Scale isimportant. Giving some of these mid-tier banks enough teeth toreally compete is going to be important."
Some lawmakers blame a lack of choice for scandals that haveengulfed the industry in recent years including the mis-sellingof loan insurance and complex hedging products and shoddytreatment of small businesses in financial difficulty.
State-backed RBS and Lloyds could come under particularscrutiny in the investigation. Lloyds is Britain's biggestprovider of personal current accounts, while RBS providesservices to more UK small businesses than any rivals.
In a further submission to the think tank, Tesco Bank's Chief Executive Benny Higgins criticised the way someof Britain's biggest banks treated customers.
"Many of the banks get away with offering their customers avery poor deal -- generating billions of pounds in revenue forthemselves as a result," he said.
(Editing by Mark Potter and Louise Heavens)
