HBOS welcomes CC decision to remove price controls

HBOS is pleased with the Competition Commission's (CC) decision to remove price controls as a key recommendation of its report on SME banking services.

HBOS has always been strongly opposed in principle to price controls. A truly competitive market is more effective than one managed through artificial price controls. Price controls only served to 'freeze frame' the market and should be considered as a last resort.

The SME banking market is not a last resort market, although the Big Four banks continue to enjoy an estimated combined market share of 80%. It is the most concentrated sector in UK banking.

Despite the imposition of price controls, HBOS has significantly increased its share of the SME 'Business Banking' market from 3% to 5% since 2001. HBOS was the first high street bank to pay credit interest on business current accounts, paying 2% below Base Rate from January 2002, prior to the Competition Commission's imposition of price controls in March 2002.

However, constructive steps are still needed to help address the "hassle factor" associated with switching SME banking accounts. Research carried out by Bank of Scotland Business Banking showed that fewer than one in ten (8%) small business owners had moved their business bank account in the past three years.

In 2002, HBOS became the first major UK bank to introduce a comprehensive account-switching service for SMEs. Called "Easy to Join," the service has provided SMEs across the UK with a dedicated team to co-ordinate the process of joining Bank of Scotland Business Banking.

Mark Curran, Head of Relationship Management, Business Banking, HBOS, said, "This will enable Bank of Scotland Business Banking to push for more market share in the SME sector. We will shortly launch a new current account which will revolutionise SME banking on the high street."

"Price controls have clearly done little to encourage small businesses to switch banks and the hassle factor of switching has still to be addressed. We will continue campaign for greater transparency and portability in the SME banking arena."