OFT announces that market study is to be conducted on state of banking competition for our small businesses
There has been some encouraging news this week as the Office of Fair Trading (OFT) announced it is to conduct a market study on competition banking for SMEs, and is seeking views on its scope. For what seems like years now, the banks have been the subject of much anger and frustration among our small business owners, with a perception from many of a reluctance to lend. Whilst the banks will beg to differ, a damning report released by the Parliamentary Commission on Banking Standards earlier this week – in which MPs suggested bankers should be jailed for misconduct – put forward the following recommendation:
“[T]hat 'the Competition and Markets Authority immediately commence a market study of the retail and SME banking sector, with a full public consultation on the extent of competition and its impact on consumers. We make this recommendation to ensure that the market study is completed on a timetable consistent with making a market investigation reference, should it so decide, before the end of 2015.”
For those not in the know, the Competition and Markets Authority is set to be formally established on October 1, and will see the Competition Commission merge with all or most of the OFT to create what is envisaged to be a stronger overarching body. The proposed market study is part of the OFT’s continued planned programme of work in retail banking, of which the first stage was a review of personal current accounts, concluded this January. The publication of the Parliamentary Commission’s report, as well as the fervent public interest in this area, means the review of banking for SMEs has been brought forward, and that can only be welcomed.
The study is to cover England, Northern Ireland, Scotland and Wales, and is inviting SME representatives, customers, and any other interested parties to offer views on it scopes, in particular on:
• competition in the supply of banking services to SMEs - whether SMEs have access to services that meet their needs and represent good value
• competition in the supply of lending or other finance to SMEs - such as whether any lack of competition between banks is holding back SME lending or other finance to SMEs
• whether there are types of SME (for example, start-ups or small financial firms) that face particular difficulties, and if so why.
Clive Maxwell, OFT chief executive, said: “A competitive banking system and access to finance is vital to businesses and to economic growth. Our review of SME banking is part of an ongoing planned programme of work in this area to allow the Competition and Markets Authority to decide whether or not to make a market investigation reference by 2015.”