The Office of Fair Trading has taken the first step towards an investigation into whether consumers are being exploited by the four big banks that dominate the market in Northern Ireland.

Responding to a "super-complaint" lodged by Which? last November, the OFT said yesterday it was "minded to refer the matter" to the Competition Commission, and has now asked the banks to respond.

Which? - formerly known as the Consumers' Association - made the complaint after discovering that personal banking customers in Northern Ireland are typically charged 21 times more than those in the rest of the UK. A customer with a £500 authorised overdraft for two weeks per month can pay up to £236 a year in charges, compared with £11 a year with a "best buy" account in other parts of the UK.

Sir John Vickers, the OFT chairman, said: "Our analysis of the super-complaint has identified questions about the effectiveness of competition in the provision of current account services in Northern Ireland."

The OFT is concerned that the NI banks impose charges that are not applied in the rest of the UK. It said there is evidence of parallel pricing and of price leadership, where one sets a price, others follow.

An OFT spokeswoman added that it was now up to the big four banks - Ulster Bank, Northern Bank, Bank of Ireland and First Trust - to change their terms and conditions, or face a full competition inquiry. Between them, the four account for 80% of the market.

Ulster Bank said in a statement it was confident it could allay the OFT's fears.

"Over 80% of our personal current account customers enjoy free banking. Furthermore, an estimated 19 out of 20 of our current account customers enjoy a deal that is either as good as or better than their equivalents in the UK. Ulster Bank believes that it has a strong case to make and looks forward to participating in the OFT's consultation."