In its fifth annual report: Banking, Consumers and Small Business, John McFall, chairman of the committee and Labour MP, said the probe should follow on from structural and behavioural remedies already proposed by the Competition Commission aimed at benefiting SMEs.
The report concluded that the banking sector was still dominated by the major four clearing banks – Barclays, HSBC, Natwest and Lloyds TSB – despite the introduction of new entrants, and that insufficient competition existed.
Furthermore, the cost of the ‘monopoly situation’ was being borne by SMEs, and therefore remedies were needed.
These include allowing SMEs to switch bank accounts without any difficulty, introducing price controls on financing in the short term and ensuring greater transparency.
Remedies recommended by the Competition Commission recently include ensuring fast error-free switching of accounts, limiting the bundling of services, improving information and transparency, and undertaking an examination of the scope for sharing of branches.
In addition it said the Big Four banks should be required to pay interest on SME current accounts in England and Wales at Bank of England base rate less 2.5%.
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