SMEs lose banking price controls

by Gill Montia

Story link: SMEs lose banking price controls

The Competition Commission (CC) has lifted the temporary price controls that it applied to the UK’s four largest banks, in 2003.

The controls determined the way in which Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland group run business accounts for small and medium-sized enterprises (SMEs).

The price controls were put in place following an investigation by the CC into the SME banking market.

They required the four banks to provide SMEs with an account that offers an interest rate of at least 2.5 percentage points below base or free money transmission services, or both.

Now that the controls are lifted, the banks will still be required to publicise changes in charges, whilst also concurring with existing undertakings designed to keep the market competitive.

These include arrangements that make it easy for businesses to switch accounts, and the presentation of prices in way that is transparent.

In addition, the CC is asking the Office of Fair Trading (OFT) to monitor the situation, following the lifting of the controls.

It will also urge the OFT to work with the British Bankers’ Association to include certain obligations in the Banking Code, when it is next reviewed.

The controls were always intended to be temporary and according to the CC, during the four years they have been applied, banks such as HBOS, Abbey, and Alliance & Leicester, have competed more strongly for SME customers.