Competition Commission condemns NI 'Big Four' banks

The North’s “Big Four” banks were condemned today for imposing higher charges and paying lower levels of interest to personal customers than would be expected if there was greater competition.

The banks were accused by the UK's Competition Commission of stifling competition to the detriment of their personal banking customers.

A report on the Big Four – Northern Bank, Ulster Bank, First Trust Bank and Bank of Ireland – stated: “A lack of clarity on charges and unduly complex charging structures and their application, combined with a reluctance among customers to switch providers, are restricting competition in the market for personal current accounts in Northern Ireland.

“These features make it likely that customers incur higher charges and receive lower levels of credit interest than they might expect in a more competitive market.”

A Competition Commission inquiry was set up almost 18 months ago after a “super-complaint” from the Northern Ireland Consumer Council and consumer group Which.

They complained that customers of the four main banks in the North suffered under charges that were not imposed by other banks in the UK. They also complained charges were too similar across the four banks.

Commenting on the report, inquiry chairman Christopher Clarke said: “Despite a number of significant recent changes in this market, competition in the provision of personal current accounts in Northern Ireland is still not working for the benefit of customers.”

It was difficult for customers to make comparisons among competing providers due to “the failure of the banks to explain sufficiently or fully their unduly complex charging structures and practices”, he said.

Mr Clarke said it took the inquiry team many months to understand what the charges were and how they were applied.

Along with a perception that switching bank was difficult and time consuming, it meant most customers could see little benefit in changing bank, he said.

He added: “Without this competitive pressure from customers, banks are likely to levy higher charges and pay lower rates of interest than might be expected in a more competitive market.”

During the course of the investigation three of the four banks introduced or announced intentions to introduce “fee-free” banking with no transaction or maintenance charges when the customer was in credit or using an authorised overdraft, said Mr Clarke.

However, Mr Clarke was less than impressed. He said: “In many cases this means charges have been increased on unauthorised overdrafts.”

Despite the accusation of overcharging, the banks were cleared of the accusation that they were working in consort.

“Despite evidence of some prices moving in parallel in the past, we did not find that the conditions for tacit co-ordination were met,” he said.