The Competition Commission's long-awaited report into the small business banking market, to be passed to the Department of Trade and Industry this week, will steer clear of tough sanctions and instead propose a code of conduct and a monitoring role for the Office of Fair Trading.
The toughest new regulations being considered by the Commission had included price controls, such as the mandatory payment of interest on small business bank accounts, and the introduction of an automated system for switching accounts to rival banks. An automatic system for the transfer of personal current accounts is due for launch in November.
But the Commission's main recommendation will be for a new small business banking code, aimed at giving customers a better understanding of the charging structures of their banks and those of rivals. It is thought that the Office of Fair Trading will be charged with monitoring compliance.
In March, the Commission released a list of possible remedies to the "complex monopoly" it identified as operating in a sector dominated by the big four clearers: Royal Bank of Scotland, Barclays, Lloyds TSB and HSBC. The remedies included extreme measures such as a possible "windfall tax" on the sector and the sale of customers to rival banks.
The big four have argued that the apparently high profitability of small business banking during periods of strong economic growth needs to be set against its unattractiveness when the economy slows. Some executives within the larger banks have privately voiced concern that regulatory interference could run foul of "the law of unintended consequences".
The Commission's inquiry stems from Don Cruickshank's March 2000 report on the banking sector which said banks made £5bn in excess profits. In June, the Commission extended the enquiry. Sources said this was so the Commission could take additional legal advice about its recommendations, after the High Court ruled the previous month that it had acted unfairly in ordering Interbrew to sell Bass's brewing assets.
Patricia Hewitt, the Secretary of State for Trade and Industry, is unlikely to make a decision on what action to take in the wake of the Commission's findings until the end of the year.Reuse content