23-08-2007
Bank price restrictions lifted for small businesses
The Federation of Small Businesses has expressed concern about a recent move by The Competition Commission to lift the restrictions on banks that limit the price of account charges for small businesses.
The price restrictions meant that four of the largest banks – Royal Bank of Scotland, HSBC, Barclays and Lloyds – had to offer SMEs an account that had an interest rate of at least 2.5% below base rate, or free money transmission services or both.
The Commission put the restrictions in place four years ago as a temporary measure over concerns that there was no real competition in the SME banking market.
The FSB is concerned about the banks’ next move after the restriction is officially lifted. They also said that a large number of small businesses had not even known the restrictions were in place and so any sudden cost increases would come as a shock.
A spokesman from the FSB said: "We're really upset the Competition Commission seems to have completely ignored this," he said. "We'll be responding again and we'll emphasise to them that small businesses are not getting what they are supposed to be getting. We don't understand why they are ignoring the facts.”
The Competition Commission’s Deputy Chairman pointed out that all banks providing SME banking services will still have to comply with behavioural rules on the ease of switching, transparency of prices, and the prohibition on bundling of different products and services.
HSBC said that the move will help them move forward. A spokesman said: "This decision will make it easier for us to continue to create new services and I am sure our competitors will be doing the same thing. It can only be good for UK plc."