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Tuesday, 6 March, 2001, 12:22 GMT
Q&A: Bank competition probe

The Competition Commission says the big High Street banks operate a "complex monopoly" in the supply of services to small firms. BBC business reporter Mike Johnson examines the issues.

What exactly is a "complex monopoly"?

It is a situation where two or more companies are seen to prevent, restrict or distort competition in any given market. But there is no suggestion the banks are acting together to do that.

What exactly have the banks done wrong?

The big four clearing banks, HSBC, the Royal Bank of Scotland, Barclays and Lloyds TSB, control the vast majority of the small business banking market.

The Competition Commission suspects the result is that interest is generally not paid out on current accounts, while only low rates of interest are paid on short-term deposit accounts.

In short, the Commission says the charges banks make to small businesses bear no relation to the costs the banks incur for providing them.

Isn't that what the Government already suspects?

Yes.

Last month the trade and industry secretary, Stephen Byers, said the fear of reduced competition in the small business market was one of his reasons for referring Lloyds TSB's bid for the Abbey National to the competition authorities.

So what will the Commission do about it?

This is only an interim report.

Despite its suspicions, the Commission has not yet decided whether the dominance of the big banks in this market is actually against the public interest.

It may feel that small business owners have the choice to access lower-cost internet or telephone banking services rather than rely on more expensive branch-based accounts.

The Commission will issue its final verdict in mid-June.

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