New code to govern small business banking

The British Bankers' Association (BBA) yesterday unveiled plans for a new code of conduct for small business banking, marking the sector's latest tactic to convince the competition authorities that the market is competitive.

The British Bankers' Association (BBA) yesterday unveiled plans for a new code of conduct for small business banking, marking the sector's latest tactic to convince the competition authorities that the market is competitive.

While a personal banking code has existed since 1982, until now there has been no industry-wide guidance on standards for small business banking. The code, which will come into force next March, will probably deal with issues like the time it takes small business customers to switch to new providers and insufficiently transparent charges, which are often bundled together.

The Competition Commission highlighted both of these issues in a hypothetical remedies letter last month. It is preparing a report for the Department of Trade and Industry to determine whether certain banks have a monopoly in the small business market.

The commission will probably take a keen interest in the final terms of the code, which will be published this summer at roughly the same time as the panel formulates its final verdict on whether a monopoly exists.

The BBA yesterday denied that banks' own codes of practice for business customers have been inadequate. But a spokesman said: "The Competition Commission investigation, as well as the Cruickshank report, has been an element in deciding to have a code for small business banking." Don Cruickshank, now chairman of the London Stock Exchange, last year attacked banks' excessive profits and lack of competition in a report on the sector.

Small businesses groups yesterday gave a guarded welcome to the new code. A spokesman from the Federation of Small Businesses said: "It is good news, but it is coming too late to seriously change the view of the Competition Commission."