Larger UK banks encourage the Government to force smaller banks to contribute towards the costs of open banking in order to “minimise the issue of free-riding”

Banks including HSBC and Barclays have railed against the high cost of reforms forcing them to share customer data with rivals in a state-backed effort to increase competition, according to The Telegraph.

Major lenders are unhappy about the burden of so-called open banking rules, which require them to hand over detailed customer information to competitors at an account holder’s request.

Responding to a consultation from the Competition and Markets Authority (CMA) into future governance of the industry, Barclays said it has been forced to fork out a significant amount of money on open banking.

The FTSE 100 lender said: “The spend on implementing the open banking remedy to date has been significantly higher than the amounts foreseen and taken into account by the CMA in its original 2016 assessment.”

It added that the CMA had wrongly expected costs to be spread out over two years, but instead the changes have taken between five and six years to implement.

HSBC echoed Barclays’ calls for a shake-up in how the scheme works, to prevent big banks from being forced to spend heavily at the whim of smaller rivals.

Major lenders should have the ability to “encourage cost discipline that has not existed to date”, HSBC said.

Nationwide, Britain’s biggest building society, also encouraged the Government to force smaller banks to contribute towards the costs of open banking in order to “minimise the issue of free-riding”.

According to bank lobby group UK Finance the country’s nine biggest lenders were asked to contribute £26m to the promotion of open banking reforms in the UK this year alone.

It has suggested that governance of the rules is changed, but this in itself has raised concerns from the likes of the British Retail Consortium that future regulation could be dominated by the big nine banks.

Initiatives such as open banking were meant to encourage people to switch banks, but many are still reluctant to do so and previous research has found that only one in five consumers have even heard of open banking.