European Commission opens consultation on current account and related services

The European Commission has today, 17 July, published its preliminary findings on current accounts and related services throughout the EU and opened a public consultation. The preliminary findings and consultation were launched at a public hearing in Brussels. Responses must be made by 9 October 2006. This is the latest step in the Commission's sector inquiry into financial services which was launched in June 2005 (click here to view our Law-Now on this).

The Commission's preliminary findings are that European retail banking markets are characterised by:

• a high degree of international and national regulation;
• a traditionally high level of co-operation among banks (e.g. payment infrastructures);
• significant market fragmentation and differences regarding market structures;
• entry barriers due to regulatory or behavioural causes; and
• a fragmented demand side (individuals, small enterprises) characterised by information asymmetry, customer immobility and very limited bargaining power.

However, the Commission has noted that the competition issues in retail banking are not straightforward. This consultation therefore represents a chance for market players to inform the Commission about the market's complexities and shape its thinking going forward.

The Commission is particularly keen to understand more about:

• Market structure and fragmentation - e.g. is fragmentation mainly due to regulatory, structural or behavioural factors?
• Banks' financial performance and pricing - e.g. what are the main reasons for the varying rates of profitability and income in retail banking across EU Member States?
• Entry barriers in retail banking - e.g. are there significant barriers to access which merit further investigation?
• Customer choice and mobility - e.g. why do retail banking customers fail to switch providers?
• Development of payment infrastructures in the context of the Single Euro Payment Area (SEPA). The Commission appears keen to ensure that SEPA is well-structured as it will have long-term ramifications in the sector. It believes that the creation of SEPA should change the competitive landscape. The Commission wishes to understand for example whether interchange fees are necessary for the development of payment instruments and whether there are issues related to industry initiatives in the context of SEPA that should be assessed from a competition viewpoint.

For the full text of the Commission's preliminary findings report and for details on how to respond to the consultation, please click here.

The Commission proposes to publish its final report - covering payment cards as well as current accounts and related services - by the end of the year.