OFT welcomes decision to lift price controls on SME banking

The Office of Fair Trading (OFT) welcomes the Competition Commission's provisional decision to lift price controls on the four main business banks in England and Wales.
The provisional decision, following a review of the market by the OFT, will boost competition to provide essential banking services to small business customers.

The OFT's review and advice to the Competition Commission, also published today, investigated changes in the market since the Competition Commission's previous report in 2002. It found that there had been sufficient improvement in competition to warrant removing the transitional undertakings agreed by banks following the 2002 report.

However, the OFT's review also noted continuing concerns around low levels of switching in the market, and a lack of price transparency for customers. The OFT recommended that the banks continue to be subject to behavioural undertakings agreed in 2002, including an agreement to ensure that customers are able to switch account quickly and simply. The banks will also be required to provide the OFT with information on their prices and compliance with other undertakings.

John Fingleton, Chief Executive of the OFT, said: “This is an important step in the development of further competition in the business banking sector. It will allow banks greater freedom to innovate and compete for customers, and will be most beneficial for those prepared to consider switching their banking service provider. The OFT will continue actively to monitor the market in future, and ensure the banks comply with their undertakings on switching and price transparency. If we find that competition is not working well for SMEs, we will consider further action.'

The provisional decision does not affect the ongoing market study or test case in relation to personal retail banking.