69/02
18 July 2002
BIG FOUR BANKS AGREE TO COMPETITION COMMISSION REMEDIES FOR SMALL AND MEDIUM SIZE ENTERPRISES
Chancellor Gordon Brown and Competition Minister Melanie Johnson today accepted undertakings from the four main clearing banks to pay interest on current accounts or provide free money transmission services to their SME customers in England and Wales.
Mr Brown said:
?The access to finance and the quality of service small businesses receive from banks are critically important to theirs, and the British economy's, productivity and prosperity. I welcome the steps taken by the banks to take forward the Competition Commission's proposed remedies to promote competition in this sector. Many of the 3.5 million small businesses in the UK have the potential to benefit from today's announcement.?
Melanie Johnson added:
"I am pleased that the banks have addressed the interim remedies which we wanted to see in place by the end of the year. I now hope we can also make good progress on the long term remedies which are needed to make competition in this market as effective as possible.?
The banks concerned are the Royal Bank of Scotland Group, HSBC, Barclays and Lloyds TSB. The rate of interest paid will be at least the Bank of England Base Rate less 2.5%. Each bank has undertaken to implement the remedy no later than 1 January 2003.
Notes to Editors
The Competition Commission report ?The supply of banking services by clearing banks to small and medium sized enterprises? (Cm 5319) was published on 14 March 2002. Copies are also available from the Stationery Office.
The Commission made a number of adverse findings about the supply of banking services. Section 88 of the Fair Trading Act 1973 gives the Secretary of State the power to ask the Director General of Fair Trading to seek legally binding undertakings to remedy the adverse effects identified by the Competition Commission in a monopoly report.
Copies of the undertakings are available on-line at www.dti.gov.uk.
The Director General is also seeking undertakings from eight banks, including the four covered by transitional remedy referred to above, that they will implement a number of behavioural remedies to improve competition in the market. The DGFT has been asked to secure these undertakings by 14 September 2002.
Media enquiries should be directed to the DTI press office, tel. 020 7215 5377 or HM Treasury press office, tel. 020 7270 5238.