Britain's big banks could face a windfall tax on excess profits if they are found to have taken advantage of small business customers, the competition watchdog said yesterday.

The Competition Commission surprised the industry and sparked a fall in bank shares when it included the tax in a list of possible solutions to the banks' "complex monopoly". The commission provisionally found a fortnight ago that small businesses were paying too much for banking services because the complex monopoly allows the banks to restrict competition. Yesterday's list of remedies will be discussed with banks before June's ruling on whether the monopoly acts against the public interest.

But senior bankers rejected the idea of a windfall tax as farcical. The commission has been investigating small business banking for a year. Barclays, Lloyds TSB, HSBC and Royal Bank of Scotland, owner of NatWest, have almost 90 per cent of the market between them.