Abstract

This study examines the definition of the UK deposit savings account market. A testing procedure is used to ascertain if the law of one price and the assumption of a unified national market may or may not be rejected. The existing UK and European literature on the definition of financial services markets is developed by using both product specific interest rate data and by incorporating non-price characteristics of financial services products in the testing procedure. This study indicates a unified UK market may be rejected for deposit saving accounts. Such a result is consistent with previous surveys of customers’ preferences (Kwast et al, 1998 and Cruickshank, 2000), which provide an indication of demandside conditions in this market. The conclusions also provide empirical support for a number of theoretical perspectives including the development of two-tier banking markets across Europe (see for example Goodhart, 1987, Williams and. Gardener, 2000).

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