21st December 2007
Business banking measures scrapped
Small and Medium Enterprises (SMEs) have reacted angrily to a decision to lift restrictions on the way that banks provide business accounts.
Temporary controls were imposed on the 'Big Four' banks in 2003, in order to make the market more competitive. The action forced banks to provide accounts that pay a rate of interest not more than 2.5% below the Bank of England base rate, or provide free transactions, or both.
The Competition Commission (CC), having judged that market conditions have significantly improved, announced today that the measures will be lifted. The decision confirms the commission's provisional findings in August.
Some controls will remain in place, including the obligation on the banks to make switching providers easy, to make prices clearer and to offer different products and services without "bundling" them together. The banks must also continue to publicise changes in charges.
However, the Federation of Small Businesses (FSB) has called the decision to lift the price controls "wholly misguided".
"We are very disappointed the commission has reached this decision and ask that it is urgently reviewed," said Mike Cherry, the FSB's financial affairs chairman."This has been a tumultuous year for small businesses and this is the latest in a long line of body blows.
"When the whole case is looked at it is clear to see that the commission has been deaf to the actual experiences of small businesses, whilst the big banks have been dumb in offering those options that had been agreed. To take this away now is a travesty," he said.
The four banks affected by the lifting of the measure are HSBC, the Royal Bank of Scotland Group, Barclays and Lloyds TSB.
Temporary controls were imposed on the 'Big Four' banks in 2003, in order to make the market more competitive. The action forced banks to provide accounts that pay a rate of interest not more than 2.5% below the Bank of England base rate, or provide free transactions, or both.
The Competition Commission (CC), having judged that market conditions have significantly improved, announced today that the measures will be lifted. The decision confirms the commission's provisional findings in August.
Some controls will remain in place, including the obligation on the banks to make switching providers easy, to make prices clearer and to offer different products and services without "bundling" them together. The banks must also continue to publicise changes in charges.
However, the Federation of Small Businesses (FSB) has called the decision to lift the price controls "wholly misguided".
"We are very disappointed the commission has reached this decision and ask that it is urgently reviewed," said Mike Cherry, the FSB's financial affairs chairman."This has been a tumultuous year for small businesses and this is the latest in a long line of body blows.
"When the whole case is looked at it is clear to see that the commission has been deaf to the actual experiences of small businesses, whilst the big banks have been dumb in offering those options that had been agreed. To take this away now is a travesty," he said.
The four banks affected by the lifting of the measure are HSBC, the Royal Bank of Scotland Group, Barclays and Lloyds TSB.
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