Published a week or so ago now, the Office of Fair Trading update on their market review of banks and their attitudes and approaches to the SME sector makes for interesting reading.
The report notes that the mainstream banking sector has made some positive movements and improvements to their SME approaches, following the 2002 Competition Commission’s investigation into banking practice.
View, print or download the full report from the OFT here.
However, there is much to be concerned about from an SME perspective ‘...the OFT has received concerns about failure to comply with…undertakings, which prevent banks from requiring an SME to take out a Business Current Account (BCA) in order to obtain a business loan (that is ‘bundling’ of BCAs with business loans). The OFT considers that compliance with these undertakings is important as they are designed to help providers to compete effectively in SME banking’.
Even in 2014 the report finds that…
- The provision of business current accounts (BCAs) and business loans remains concentrated among a small number of major banks.
- Barriers to entry and expansion may be contributing to newer or smaller providers finding it difficult to enter and expand their business across the core business banking products.
- SMEs find it hard to differentiate between providers. There are low levels of shopping around and switching, and low awareness of alternative sources of finance.
More troubling is the aspect of the report which cites new, alternative lenders as being hampered in delivering services to SME’s because, allegedly, the mainstream banks are moving at a snails pace when authorising transfers or in waiving security on current loan arrangements for additional alternative lender charges to be rendered.
Two things occur. The notion of ‘level playing field’ is rendered useless in competition terms, and that the openness and clarity of most of the Social Finance sector, given their strong ethical and community focus, shines like a beacon across the current banking landscape.
Read the full Office of Fair Trading Press release on-line here.