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OFT statement regarding the Competition Commission decision on business banking

181/07    21 December 2007

The OFT has today welcomed the Competition Commission's decision to release the four largest business banks in England and Wales from price controls agreed in 2003, based on advice provided by the OFT earlier this year.

The OFT will continue to monitor banks to ensure that they comply with their remaining undertakings in the interests of small business customers.

NOTES

1. The Competition Commission (CC) announced its provisional decision to release the price controls in August 2007, and has now finalised its decision following public consultation. For details of the OFT's recommendations to the CC, see press release 122/07. Details of the CC's final decision are available on the Competition Commission's website.

2. The price controls (known as 'transitional undertakings') were agreed following the Competition Commission's 2002 report on SME banking services. They required the four main banks in England and Wales to offer all SME customers either interest on credit balances at a specified rate (2.5 per cent below the Bank of England base rate or higher), or free core money transmission services (such as direct debit payments and cash transfers). The undertakings were signed by: Barclays Bank plc, HSBC Bank plc, Lloyds TSB Bank plc and the Royal Bank of Scotland Group plc (including National Westminster Bank).

3. A range of 'behavioural undertakings' were also agreed following the Competition Commission's 2002 report. These were aimed at increasing price transparency, reducing switching costs and limiting the bundling of current accounts with other banking services. The behavioural undertakings were signed by nine clearing bank groups in the UK: AIB Group (UK) plc, Bank of Ireland, Barclays Bank plc, Clydesdale Bank plc, HBOS plc, HSBC Bank plc, Lloyds TSB Bank plc, Northern Bank Ltd and the Royal Bank of Scotland Group plc.

4. The OFT launched its review of undertakings in January 2006 (see press release 14/06) and submitted advice to the Competition Commission in January 2007. The OFT's review was conducted under section 88 of the Fair Trading Act 1973, which continues to apply by virtue of Schedule 24 of the Enterprise Act 2002, and under section 5 of the Enterprise Act 2002, which gives the OFT power to obtain and compile information about matters relating to the carrying out of its functions so that it can take informed decisions and carry out its other functions effectively.

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