Since a Competition Commission investigation concluded over a decade ago, eight major banks in the UK have been prohibited (by legally-binding undertakings) from requiring SMEs to open a business current account with them as a condition of obtaining a loan – this is called “bundling”.

Yet SMEs have continued to complain about bundling happening within the banking system, despite the regulations against it.

Following an investigation into the practice, and with the eight major banks also carrying out a detailed audit of their compliance, the Competition and Markets Authority (CMA) found that two banks, First Trust Bank in Northern Ireland and HSBC, have breached the undertakings.

Both banks have required SMEs to open an account with them as a condition for obtaining a business loan. The audits also revealed that at these two banks, there was a relatively-low awareness among staff of the prohibition under the undertakings.

“Breach of these undertakings is a serious matter and we have directed First Trust Bank and HSBC on the actions they must take to immediately correct the situation – so that it is clear to both their staff and their SME customers that obtaining a business loan is not dependent upon opening an account,” says Alex Chisholm, chief executive of the CMA.

“Although all 8 banks have recognised the importance of complying with the undertakings and are taking steps to address this, when breaches occur we need to ensure that there will be full compliance. 

“In addition, all 8 banks will need to show that they have the correct systems in place to ensure that ‘bundling’ will not occur in the future, and we are requiring a further audit next year to confirm this.”

The reason bundling is bad for business is that it prevents customer choice, and prevents providers from competing effectively in SME banking.

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