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Major competition barriers in the EU’s retail banking sector have been uncovered by the European Commission which now plans to use its competition enforcement powers and launch separate investigations into particular cases.
The Commission found widespread barriers deterring new players from entering the market, and markets remain fragmented along national lines.
Sam Szlezinger, a partner at Denton Wilde Sapte, says that in some member states, sustained high profitability, high market concentration and entry barriers mean that banks may be able to exploit consumers and small firms.
“The Commission is concerned about card payment systems; credit registers; co-operation between banks; and setting of prices and policies,” he adds.
Areas in which enforcement action is being considered include payment card fees—merchant fees and interchange fees vary widely across the EU, indicating low levels of competition; some aspects of co-operation between banks; and product tying, which may infringe competition law if practised by banks holding a dominant position.
Discriminatory rules in payment cards and payments systems markets will also be targeted as will the use of some credit registers which may be used to exclude new entrants to retail banking markets.
Tom Morrison, an associate at Rollits Solicitors, says the Office of Fair Trading has been keeping tabs on the UK banking and consumer credit sectors for some time.
“From cross-border enforcement of claims under s 75 of the Consumer Credit Act 1974, to excessive banking charges on consumers’ credit card, current and mortgage accounts, the message has been clear: banks need to do more to protect consumers and justify what some see as exaggerated levels of profit.”
He adds that while the Commission comments on issues such as disproportionately high banking charges for consumers, it focuses more on the inconsistencies in the markets across the member states.
“One thing is clear,” he adds. “The banks are not in for an easy ride.”
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