UK banks will today introduce a new code of conduct for small business banking, pre-empting the Government's forthcoming response to the Competition Commission's 18-month investigation into the market.
Signatories to the code, which was devised under the auspices of the British Bankers Association, will agree to make no unilateral decisions about pulling the plug on struggling firms. They will also aim to complete the transfer of customers to rival banks within five weeks, and pass customer details to the new bank within five days.
There are no provisions to compensate customers in cases of non-compliance. Overall compliance will be monitored by the Banking Code Standards Board, which has the power to name and shame miscreants.
Andy Brenan, BBA's director, dismissed suggestions that the code had been designed as a blueprint for any proposed rulebook from the Government, and was aimed at seeing off draconian measures that might follow the publication of the Commission's investigation. "We announced this in April last year and the timing of its launch is nothing new," he said.
He added that the Government had "certainly been aware" of the formulation of the code after meetings with officials from the Treasury and the Department of Trade and Industry. The code was already under review, with an updated version scheduled for January.
The Federation of Small Businesses saw the code as timely given the economic slowdown, but said it would have welcomed a commitment to account switching within two weeks rather than five.
"The early nineties saw the relationship between small firms and banks sour. We don't want that repeated. This code should mean that problems are resolved amicably," said Stephen Alambritis, the FSB's head of parliamentary affairs. "The complaints we get nowadays are mostly about coldness and a 'getting tough' approach from bank managers."
Barclays, one of the largest players in the market, said it fully supported the code, noting that it was in the pipeline before the Commission began investigating the sector. HBOS, which last week suffered the embarrassing revelation that it could not provide services to window cleaners and taxi drivers, called for greater publicity of the industry's automated account switching facility.
It will be 20 weeks this Friday since the Commission's report was passed to the Department of Trade and Industry. The investigation followed Don Cruickshank's review of the entire UK banking sector, which highlighted small business banking as an area of concern when it was published in March 2000.
Royal Bank of Scotland, Lloyds TSB, HSBC and Barclays control almost 85 per cent of the market. Among the remedies the Commission has already suggested to improve competition is a windfall tax on incumbents to fund new entrants.Reuse content