British Banks May Face Probe of Checking Accounts, Loans
U.K. antitrust regulators said they may open an investigation into checking accounts and banking services for small- and medium-sized businesses.
The Competition and Markets Authority will issue a decision on starting a full probe into banking for small firms and current account services tomorrow, the London-based agency said in an e-mail. It said in July that it was considering an investigation because consumers lack effective options.
British lawmakers want to loosen the grip of Britain’s four biggest lenders — Barclays Plc (BARC), HSBC (HSBA) Holdings Plc,Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc (RBS) — which control more than 90 percent of the market for small-business lending and have been hit by scandals including improper sales of interest-rate swaps and payment protection insurance.
“The CMA has indicated that, if it does open an in-depth probe, it would look closely at the demand-side, particularly customer inertia and the degree of customer engagement,” said Rona Bar-Isaac, a lawyer at Addleshaw Goddard LLP in London.
Some recent developments that aim to stoke competition such as a seven-day limit for customers to switch banks and better access to payment systems are “just starting to be operational,” said Emanuela Lecchi, a lawyer at Watson, Farley & Williams LLP in London. “Maybe they should give a little bit more time for these changes.”
Rules Broken
HSBC, Europe’s largest bank, and Allied Irish Banks Plc’s First Trust Bank were criticized by regulators last month. The banks broke competition rules by forcing smaller companies to open accounts before they could borrow money, the CMA said.
Sky News reported yesterday that the CMA would open an in-depth probe.
The banks had submitted proposals to head off a full market probe, including setting up a comparison website and establishing new standards to make it easier for small businesses to switch lenders. The CMA said in July that it was leaning toward opening the in-depth probe rather than accepting the commitments.
Lambros Kilaniotis, a lawyer at RPC in London, said that the regulator may have decided that the proposals didn’t address their concerns.
Voluntary Measures
“They can say we’ve seen these voluntary measures and we don’t think that is enough and then just proceed with the market investigation,” Kilaniotis said.
The British Bankers’ Association in London said it couldn’t comment on the CMA probe.
Several new banks have started up in an effort to challenge the country’s biggest lenders. New entrants in recent years include Metro Bank Plc, Tesco Bank and TSB Banking Group Plc. (TSB)Their combined market share is around 5 percent, of which TSB represents 4.2 percent, the CMA said.
Previously, the eight-month-old CMA’s predecessors have struggled with attempts to regulate the finance industry. In January 2013, the Office of Fair Trading decided not to probe personal checking accounts, saying there had been progress that made it easier for consumers to compare and switch providers.
In 2009, the U.K. Supreme Court blocked the OFT’s efforts to challenge fees that lenders charged customers who exceeded overdraft limits.
Source: Bloomberg – British Banks, Checking Accounts, Loans / legal news/
