22nd Oct 2014 10:32
LONDON (Alliance News) - HSBC Holdings PLC and Allied Irish Banks PLC's First Trust Bank were Wednesday scolded by UK competition regulators for telling some small- and medium-sized enterprises that opening an account with them was a condition for obtaining a business loan.
The Competition and Markets Authority, which took over the Office of Fair Trading's responsibility for competition in April, said it has directed HSBC and First Trust to ensure that their staff comply with the rules.
Since a Competition Commission investigation concluded in 2002, eight major banks in the UK have been prohibited from requiring SMEs to open a business current account with them as a condition of obtaining a loan. This practice is known as bundling and is designed to safeguard customer choice and to help providers to compete in SME banking.
But during a recent market study on SME banking, the Office of Fair Trading became aware of concerns that some banks might be breaching the rules. These concerns prompted the eight major banks to agree to carry out a detailed audit of their compliance with, and their staff?s awareness of, the legally binding undertakings prohibiting them from the practice of bundling.
The audits also revealed that at two other banks there was "relatively low" awareness among staff of the prohibition against bundling. All eight banks will be required to carry out another audit and report to the CMA again by July 2015.
"Although all eight banks have recognised the importance of complying with the undertakings and are taking steps to address this, when breaches occur we need to ensure that there will be full compliance. In addition, all eight banks will need to show that they have the correct systems in place to ensure that ?bundling? will not occur in the future, and we are requiring a further audit next year to confirm this," CMA Chief Executive Alex Chisholm said in a statement.
"In the meantime, we would encourage SME customers to get in touch with us with any concerns they may have about the compliance of any of the eight banks with these obligations," Chisholm added.
HSBC shares were trading up 1.0% at 631.50 pence late Wednesday morning.
By Samuel Agini; [email protected]; @samuelagini
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