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OFT review of business banking services

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27th Jan 2006
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The Office of Fair Trading (OFT) has launched a review of the promises given in 2002 by UK clearing banks, to cut the cost of banking services to SMEs and to encourage competition in the market.

The promises - or 'undertakings' - were given by banks in response to a study by the Competition Commission, which found that the largest clearing banks in England and Wales, accounting for over 70% of the value of SME balances, were making excessive profits of well over £700 million a year between 1998 and 2000.

The new OFT review will look at the impact of the undertakings, focusing mainly on the promise to offer free banking services or to pay interest on business current accounts. This undertaking was signed by the four main clearing banks: Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland Group (including NatWest).

The review will also assess the effect of promises to encourage competition in the banking market by reducing barriers to entry and expansion; to improve information provided to business customers; and to encourage switching by SME customers. These 'behavioral undertakings' were signed by the four main clearing banks plus five other clearers: AIB, Bank of Ireland, Clydesdale, HBOS and Northern Bank.

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By frauke
02nd Feb 2006 20:11

Banking & SME
Why can HSBC in Hong Kong do the following, but HSBC UK cannot:

1. Charge a monthly fee of £2.50 (approx) with no transaction charges or if you hold more than a certain amount of money they waive the charge.

2. Hold money in one account in the currency it is received, so you can have several currencies in one account.

3. Charge about £3.50 for receiving International payments. (If they come via HSBC London, they deduct an additional £25.00!)

4. Charge about £12.00 for sending International payments which arrive in London within 2 hours of the instruction, and arrive with NO deductions for any other bank charges.

4. Make transfers/pay bills 24 hours a day to other accounts at other branches in Hong Kong for free, and they are credited to the other account immediately!!!!!!

5. Charge £185.00 for a Letter of Credit transaction instead of £265.00 charged in the UK.

I could go on - If we all banked in Hong Kong instead of the UK, our bank charges would be almost non existant!

We had the option of moving accounts in the UK, but found what was on offer was the same as what we already had. When the Hong Kong account was opened 2 years agoto assist with dealing with a operation run in China and shut down with a year, we had no intention of using it to the extent we have. By doing so, we have reduced bank charges by over 50% already. If we could only use this account and close our UK account we would, but we have UK suppliers to pay and although its slower, unless they all move thier accounts to Hong Kong, (and a couple have!) the UK bank account is still needed.

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