ClickAJob News

The Competition Commission has announced its provisional decision to lift temporary price controls imposed on the UK's four largest banks in regard to services provided to small businesses.

Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland group have been subject to the price controls since 2003, when they were introduced by the watchdog following an investigation it carried out into banking services for small and medium-sized enterprises (SMEs).

Under the controls the four banks were required to offer small firms a business account that offered interest charges of at least 2.5 percentage points below the country's base rate, or alternatively free money transmission services.

The Competition Commission had ruled that the controls were temporarily necessary in order to boost competition in the small business banking sector, with a total of nine banks also agreeing to "behavioural undertakings" to improve services in the long-term.

Pledges made by the banking industry were aimed at making prices more transparent and preventing banks from making the supply of small business services conditional on the purchasing of other facilities, such as loans and personal current accounts. They were also designed to make it easier for small business owners to switch banks if they were dissatisfied with the service they received.

But in a statement today the Competition Commission ruled that the temporary price controls, imposed on the country's biggest banks, were "no longer appropriate" given that other financial institutions were now competing for small business custom more strongly.

Commenting on the decision to remove the controls after four years, deputy chairman of the commission, Christopher Clarke, explained: "During this period, other significant banks, such as HBOS, Abbey, and Alliance & Leicester, have competed more strongly for SME customers and improved their market position."

He added: "SMEs have raised their expectations of what banks should provide and are more likely to consider switching if they do not get what they want."

However with the UK's four major banks still accounting for around 85 per cent of the market for small business services, the regulator has ordered that they should still be required to publicize any changes to their charges.

The Office of Fair Trading (OFT) has also been charged with monitoring their behaviour.