UK inquiry may yield bank fee cut for Irish SMEs

Irish banks may have to reduce charges for small and medium-sized business customers as a result of an inquiry into uncompetitive practices in the British market.

British competition authorities have found that its major banks, including Ulster Bank parent Royal Bank of Scotland, had a monopoly in services to small businesses but it has yet to decide whether they acted against the public interest. The other major players in the small and medium-sized business sector in the Republic - Bank of Scotland, Bank of Ireland and AIB - were also implicated in the preliminary report.

The commission will issue several remedies that could include a price cap on charges for money transmission services, or moves to make it easier for businesses to switch accounts. The final report is due in June. The Competition Authority in the Republic will monitor the outcome of this extensive study of the banking industry in the UK, given the similarities with the Irish market. It could start its own examination if the UK banks were found to have been colluding in their business practices to the detriment of small business customers. The Irish Small and Medium Enterprises association (ISME) yesterday called for an independent review of Irish financial institutions and how they deal with small business customers.

AIB and Bank of Ireland have the biggest share of the SME market in the Republic closely followed by Ulster Bank and Bank of Scotland. AIB refused to disclose its market share yesterday and said it would await the final report of the UK commission before commenting. AIB has been named the best small business bank in the UK for the past eight years.

Bank of Ireland estimates it has 17 per cent of the SME market and less than 1 per cent of the UK market. Ulster Bank said it was the third largest player in that sector in the Republic but was one of the dominant banks in the UK small business sector.

Bank of Scotland, which now includes the State-owned ICC Bank, is estimated to have around 13 per cent of the SME market.

The British commission's provisional findings come after a year-long inquiry into UK banks' small business operations.