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OFT refers Northern Irish personal banking market to CC

100/05    26 May 2005

The OFT has referred the market for personal current account banking services in Northern Ireland to the Competition Commission (CC) for further investigation. This follows the OFT's analysis of a super-complaint submitted by Which? in conjunction with the General Consumer Council for Northern Ireland about personal current accounts (PCAs) in Northern Ireland.

Having considered the super-complaint and the responses to its consultation on a market investigation reference, the OFT is of the view that the legal test for a market investigation reference is met.

Download reasons for reference (pdf 253 kb).

There are features of the PCA market in Northern Ireland which the OFT suspects restrict competition, and which warrant further investigation by the CC. There is a high level of concentration in the market and the OFT has found evidence of behaviour among the four largest banks leading to, or demonstrating, weak competition between them. For example:

• they impose a number of charges when customers are in credit and overdrawn which are not found in the rest of the UK (and there are no offsetting advantages such as higher interest payments on positive balances)
• they do not actively compete on price and there is evidence of parallel pricing behaviour among them, and of possible price leadership and price signalling
• they do not actively compete for customers switching accounts.

In addition there appear to be low levels of switching by customers, both between rival banks and to alternative accounts within the same bank.

Sir John Vickers, OFT Chairman, said: 'Our analysis of the evidence presented to date gives us reasonable grounds to suspect that there are features of this market which restrict competition. It is now for the Competition Commission to undertake a thorough investigation of the market and, if necessary, to put appropriate remedies in place.'

NOTES

1. The right to submit super-complaints was created by section 11 of the Enterprise Act 2002. A super-complaint is defined under section 11(1) of the Act as a complaint submitted by a designated consumer body that 'any feature or combination of features, of a market in the United Kingdom for goods or services is or appears to be significantly harming the interests of consumers.'

2. On 15 November 2004 Which? submitted on their own behalf and on behalf of the General Consumer Council for Northern Ireland (GCCNI) a super-complaint to the OFT about PCAs in Northern Ireland. It is available on the Which? website.

3. Section 11(2) of the Enterprise Act requires the OFT, within 90 days of receiving a super-complaint, to publish a reasoned response saying what action, if any, it proposes to take. Under section 131 of the Act the OFT may make a market investigation reference to the CC where it has reasonable grounds for suspecting that any feature, or combination of features, of a market in the UK for goods or services prevents, restricts, or distorts competition in connection with the supply or acquisition of any goods or services in the UK or part of the UK. More information and the OFT guidance is in the market investigation references area of this website.

4. PCA banking services provide customers the means to hold deposits; receive and make payments by cheque, debit card and cash machine facilities; and make regular payments via direct debits and standing orders. Industry sources estimate that the value of deposits held in current accounts in Northern Ireland is in the region of £1.9 billion. It is estimated that 78 per cent of the Northern Ireland population (1.68 million in the 2001 census) have PCAs. Four banks accounted for around 77 per cent of the Northern Ireland PCA market in 2003. They are: Ulster Bank, Northern Bank, First Trust Bank and the Bank of Ireland. Four smaller providers have market shares in the range of two to seven per cent. Only five per cent of the Northern Ireland population were estimated to have access to a current account on-line in 2003, compared with 21 per cent in Great Britain.

5. The reference document, reasoned response to the Which? super-complaint and the consultation document are available from the super-complaints area of this website.

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