OFT confirms scope of market study into SME banking


The OFT also plans to consider other sources of finance which exercise a competitive constraint over the focal products, which they have identified as including peer to peer lending, sales finance and asset finance.

Interestingly, the OFT has advised that it will consider splitting its analysis on a geographic basis in line with the Competition Commission’s (CC) conclusions in 2002, thereby separating out England & Wales, Scotland and Northern Ireland.

As well as identifying for review the undertakings given in 2002, the OFT has also listed switching, transparency and the effectiveness and nature of competition in SME as its key focus issues. This will include considering concentration, degree of competition between banks, barriers to entry and expansion and parameters of competition.

Another interesting angle to this market study is the confirmation that it will be the first collaborative project between the OFT and the FCA under the FCA-OFT Competition Concordat. The FCA will have two full-time employees working on the study with the OFT and the Steering Committee will be composed of both FCA and OFT senior officials.

Despite the complexity of the issues identified and the new working arrangements, the OFT anticipates completing the project and reporting on it in early 2014.


The SME banking market has been waiting in the wings for a few years, with lots of complaining, but little detailed scrutiny of it by the OFT compared to the retail banking market over the last 3 years. However, it is now its turn to be more closely inspected by the OFT. While the OFT may be hoping to squeeze some voluntary remedies from the SME banking sector in line with those given in the retail space ultimately the evidence obtained will be utilised to help inform the OFT’s response to the IBC’s recommendation that it considers making a market reference to the CC of retail banking by 2015 if sufficient improvements have not been made by then. Given the issues at stake, the early 2014 timeline, however classified, is very tight which might help to focus negotiations between the OFT and the banks but ultimately the real deadline is 2015.

Both the OFT and the parties involved in the market study also need to be mindful of the judgment delivered by the CAT on 2 October in the context the CC’s provisional findings in the private healthcare market investigation. In a fairly damning judgement the CAT found that the CC’s rules on access to information on which it came to its provisional findings breached basic rules of natural justice and its statutory duty to consult the parties to the investigation so as to give them a fair opportunity to correct or contradict those findings.