Bank practices hindering competition

BANKS have not done enough to remove anti-competitive practices and should be forced to become more customer-friendly if they do not do so voluntarily, the state competition watchdog said yesterday.

The Competition Authority’s report on the banking sector, published yesterday, said barriers to competition were costing small businesses €85 million every year and deterring personal customers from getting the best banking deals possible. The report confirmed the initial findings of a draft report published last December and set out a shopping list of 25 demands on banks, the Financial Regulator and the government to improve competition in the sector.

Competition Authority chairman John Fingleton said increased competition was necessary to make banks take greater notice of customer needs. “The Competition Authority has identified a number of areas where competition is not allowed to develop freely and unencumbered and we have made appropriate recommendations,” he said.

“These recommendations will have a significant impact, and will have a knock-on effect in other areas of banking.”

Among the recommendations are calls on banks to improve the switching code brought in earlier this year to facilitate customers that wish to change banks.

The authority said banks needed to examine the possibility of shortening the time currently taken to transfer a customer from one institution to another.

It said the code, which is voluntary, should be scrapped and replaced with a statutory alternative if the Financial Regulator found it was not sufficient to encourage switching.

The current code results in a time lag of up to seven working days between leaving one bank and having a new account fully operational. By contrast, it takes around two hours for a customer to switch mobile phone networks since new rules were introduced by the telecoms regulator.

Other measures include changes to account opening procedures to make it easier for customers to satisfy legal requirements to provide identification.

The authority also called on the government to consider changes to the controversial stamp duty levies of €40 on credit cards and €20 on Laser debit cards to promote switching between banks.

The authority also said the current regime that regulates bank charges should be scrapped, but only when the level of competition has increased significantly.

The body found banks competed aggressively in the race to attract customers without bank accounts but this was not repeated in the market for existing bank customers.