IT was all meant to have been so different, at least in the mind of government.
A bright new dawn with a raft of start-up or beefed-up challenger banks to take on the establishment.
However, nearly five years after the financial crisis got going in earnest, little has changed.
The tale of a UK banking sector revived by fresh competition chimed with the mood of the time, with the public laid low by the global financial crisis and justifiably annoyed with the banks. There was, and remains, a case for increased competition.
However, for anyone who cared to think through what politicians in the Conservative-Liberal Democrat Coalition and previous Labour administration were telling us, their notion of an influx of new entrants and scaled-up challengers looked fantastical from the very start.
If only those politicians could have used the potion and cake in Alice in Wonderland to scale up the small players and shrink the big banks.
It should have been clear from the outset there were few, if any, natural buyers for the parcels of hundreds of branches being put on the block by Royal Bank of Scotland and Lloyds Banking Group as a result of European Commission competition rulings in late 2009.
Yet few, if any, politicians seemed to sit down and consider how a start-up or smaller player would raise the huge amounts of capital required to make these large and complex acquisitions amid the worst economic downturn in living memory.
There were other impediments to these branch sales, including whether anyone, even if they could get the money together, could in any realistic sense take on the big UK players with parcels of branches with heavy concentration in particular areas.
National Australia Bank, with Clydesdale Bank in Scotland and Yorkshire Bank, has over the decades lacked a UK-wide presence. Its attempts at rapid organic expansion into the south of England, in the boom days ahead of the financial crisis, did not provide the answer to this problem. Incidentally, NAB has not been shy in recent times in highlighting the lack of a buyer for its UK operations, at a time when some of its Australian investors have been pushing for such an exit.
The Co-operative Group, owned by its members, reached a broad agreement to buy the package of more than 630 branches being sold by Lloyds Banking Group, a parcel of assets which includes the Lloyds TSB Scotland network, after a long auction process. This auction had for a while involved NBNK, an Alternative Investment Market-listed company set up by former Lloyd's of London insurance market chairman Lord Levene to acquire bank assets. Virgin Money also had a look.
Co-op's proposed acquisition of these branches, which it had emphasised would give it a major high street presence in Scotland, fell apart this spring. The collapse of this deal was probably for the best, with Co-op Bank subsequently revealing a capital shortfall of £1.5 billion.
Yesterday, The Co-operative Group unveiled a pre-tax loss of £559 million for the 26 weeks to July 6. A key factor was a £496m charge for bank loan impairments. There was also a £148.4m write-down of information technology assets. And Co-op unveiled an additional £61m provision for customer redress, relating partly to payment protection insurance.
So much for hopes that Co-op Bank would be the one to take on the big boys and transform the sector.
Spanish bank Santander, already a sizeable UK player, last October pulled out of a long-arranged £1.7bn deal to buy more than 300 branches being offloaded by RBS, many of them in the north-west of England.
So, nearly four years on from the European's Commission's order for RBS and Lloyds to sell branches, we are not really any further forward. City advisers have benefited, in terms of making money out of the auction processes. However, with no noticeable increase in banking competition in spite of valiant efforts by some small players in the sector, there has been no benefit to households or business.
We should remember banking sector competition had already been reduced, albeit pretty much unavoidably, when Lloyds TSB was allowed to step in and buy Bank of Scotland parent HBOS after this previous "fifth force" came close to collapse in autumn 2008.
The RBS branch auction is back on again, with the newly listed W&G Investments vehicle involving former Tesco director Andrew Higginson having declared an interest. We will wait and see what happens. Lloyds now plans to float its 630-plus branches as TSB next year. But it seems unlikely a listed TSB, comprising assets which failed to find a buyer, will have a dramatic impact on competition.
Tesco Bank and Sir Richard Branson's Virgin are showing little sign of shaking the pillars of the establishment.
Politicians' inability to force change in the banking sector is demonstrated by the fact bumper bonuses go on as normal, even as households continue to foot the bill for the financial crisis.
And politicians' vision of a UK banking sector transformed to the benefit of households and businesses by new competitive forces appears to be as much of a pipe dream as ever.
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