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OFT to review undertakings in SME banking services
The UK Office of Fair Trading (OFT) is today launching a review of the undertakings given by clearing banks relating to the supply of banking services to small and medium-sized enterprises (SME) in the UK. The undertakings were given following a 2002 report by the Competition Commission (CC) and were designed to:
- remedy excessive profits and prices by requiring the main four clearing banks to offer free banking services or to pay interest on business current accounts (transitional undertaking);and
- encourage price competition by reducing barriers to entry and expansion in the market; improve information provided to business customers;and encourage switching by SME customers (behavioural undertakings).
The review will focus largely on the short term impact of the transitional undertaking on excessive profits and prices and whether the effectiveness of the undertaking has been compromised by the banks, for example by increasing money transmission charges. It will also consider the overall impact of the behavioural undertakings on competition generally. Unless its interim findings indicate a need for substantial further work, the OFT aims to advise the CC around the end of 2006.
Frontier (London) advises HSBC.
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