Saturday
Nov 22nd
NEWS
| Lifting of SME bank price controls confirmed |
|
The Competition Commission (CC) has confirmed that the price controls imposed on the four largest banks for servicing SME accounts are to be removed. A provisional decision to drop the controls, which were set up in 2003 as a temporary measure, was made in August. The price controls were introduced to encourage competition among banks that provide services for smaller firms. They required the four banks to make available to SMEs an account that offers an interest rate of at least 2.5 percentage points below the base rate or free money transmission services, or both. Although the price controls are to go, the banks will still be monitored to make sure that they make switching accounts easier and prices more transparent, and that they do not bundle different products and services. They are also required to publicise any changes in charges. The CC has recommended that the Office of Fair Trading (OFT) should actively monitor all SME banks’ behaviour following the lifting of the price controls and raise awareness of any worsening of their offers. The OFT additionally will be working with the banks to ensure that SMEs become more aware of the banks’ obligations to make it quick and easy for them to switch accounts. Christopher Clarke, the CC’s deputy chairman, said: “Having listened carefully to all the responses we have received since August, we remain convinced that competition in this market, and the interests of customers, are best served by continuing to improve customers’ awareness of the banks’ individual offers and their ability to switch providers. This will provide the best competitive constraint on the banks. “The evidence since our inquiry in 2003 is that even though the four largest banks continue to hold a large market share and switching levels, whilst improved, are still relatively low, the other banks not covered by the price controls have competed more strongly for SME customers and improved their market position. At the same time, SMEs have raised their expectations of what the banks should provide and are more likely to consider switching.” Mr Clarke added that, although there is still room for improvement, “the price controls are no longer necessary and that the remaining competition issues are best addressed by the behavioural undertakings that remain in place”. He concluded: “This is why we are maintaining the measures which ensure that banks make switching easy for SME customers. We are also retaining and looking to strengthen customers’ awareness of this obligation and the various products, services and charges offered by the banks.” |
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