01 February 2007

Telegraph: Britain could gain from EU shake-up

British banks could be major beneficiaries of the European Commission's renewed attempt to improve competition.

Neelie Kroes, the EU competition commissioner, published her final report on the European retail banking sector yesterday with the warning that 'the Commission will make full use of its powers' to tackle what it described as 'widespread competition barriers'.

Analysts noted such a move would pave the way for a greater British banking presence on the continent. Antony Broadbent of Sanford Bernstein, the investment bank, said: 'Removal of competition barriers could allow UK banks to expand across Europe.'

British banks are already making concerted efforts to break into Europe's 📺bn-🔓bn retail banking market, the 173-page report showed. It stated: 'The provision of cross-border services is not developing as fast as it could. Only 9% of banks surveyed attempted cross-border entry, with the UK banks being the most active.'

Many of the Commission's concerns have already been addressed in the UK, according to the British Bankers' Association. There is no charge for closing a current account, for example, and no compulsory bundling of products – two of the report's key issues. The BBA said the UK industry was 'vibrant and competitive … it offers some of the cheapest services in the EU [and] provides clear information on fees and charges.'

Payments cards, whose transactions topped ԁ,350bn in 2005, were the central concern of the report. It found that banks in some EU states charged retailers more for overseas credit cards than domestic rivals. There is no such discrimination in the UK, according to the UK payments association, APACS. An APACS spokesman said: 'Any correction of this [discrimination in the EU] is more than likely to be good news for UK card providers.'

The inquiry, launched in June 2005, stopped short of proposing any solutions but Ms Kroes said the Commission would 'work closely with national competition authorities to tackle any serious abuses'. Critics remained sceptical about whether the report would revolutionise Europe's banking market and how any proposed changes would be enforced. However, Ms Kroes said the 'outcome of the inquiry should boost competition in the run-up to the creation of the Single Euro Payment Area'.

© Graham Bishop