Office of Fair Trading brings forward study on banking competition for SMEs

A lack of lending to small and medium-sized businesses has prompted the Office of Fair Trading to conduct a study on banking competition.

As part of the Office of Fair Trading’s (OFT) programme of work in retail banking, the body is bringing forward its examination of banking for small and medium-sized enterprises (SMEs).

The scope of its study will involve the competition in the supply of banking services to SMEs regarding needs and value, and competition relating to lending or other finance.

The OFT will look at whether any lack of competition between banks is holding back SME lending.

Clive Maxwell, chief executive of the OFT, comments, ‘Our review of SME banking is part of an ongoing planned programme of work in this area to allow the Competition and Markets Authority to decide whether or not to make a market investigation reference by 2015.

‘We welcome the Parliamentary Commission on Banking Standards report which stresses the importance of competition in this sector.’

The Parliamentary Commission on Banking Standards report, published on 20 June, includes recommendations such as a market study of the retail and SME banking sector and a full public consultation on the extent of competition and its impact on consumers.

Nick Montague, CEO of Fundingstore, says, ‘The demise of personalised banking relationships has been a critical factor in the lack of lending to SMEs.

‘The advent of technology driven systems removes the human decision making factor too often and in some cases, good lending opportunities get rejected unnecessarily.’

As part of the process, the OFT will be working with the Financial Conduct Authority (FCA), the Bank of England and the Prudential Regulation Authority. It is also calling for SME customers to submit views.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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