The Office of Fair Trading has announced that it is launching a review of the bank charges agreement made by business banks three years ago. The agreements were designed to clamp down on the banks' excessive profits by making them offer free banking or pay interest on credit balances. The other key recommendation was to increase competition in the market by making it easier for businesses to switch accounts.
In 2002 the Competition Commission reported that SMEs provided 55% of jobs and 45% of all business turnover in the UK. The report also revealed that the value of balances for SME customers was approximately £228 billion and that the largest clearing banks held over 70% of these balances. The Competition Commission ruled that, over the period 1998 to 2000, the main clearing banks made excessive profits of over £700 million a year.
The review has been welcomed by the Federation of Small Business. Despite improvements in SME banking, the FSB believes that more can be done to improve services. Angela Silberberg, FSB Deputy Policy Manager, said: "The service provided to small businesses by the large banks for many years has been disappointing and the progress that has been made in recent years has been good news for small firms. the FSB supports self regulation for the banks and has found that they have an open and constructive approach to the reviews of the Banking Code."
She continued: "However, we feel that they can do more to protect business customers by ending branch closures and promoting inter-bank agreements, which allow customers to use branches where they do not have an account."
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