Examination of Witnesses (Questions 380
TUESDAY 18 JUNE 2002
380. Transparency and clarity are the buzz words
here. Could I look at the issue of complex monopoly situation?
Under the 1973 Fair Trading Act three conditions have to be met.
The Competition Commission said that the eight largest clearing
banks, including yourselves, as a group were providing more than
25 per cent of services, indeed the Big Four were providing 86
per cent. The second issue is that you are so conducting your
affairs as to restrict or distort competition. The third one is
to show that restriction or distortion is working against the
public interest. The Competition Commission have been very clear
in saying that you as a group have been involved in this complex
monopoly situation. Do you accept their conclusions?
(Mr Harley) I do not think that included us, as I
read the report.
381. It says the eight largest clearing banks
in which you are included.
(Mr Harley) I think we were number nine on the list.
As I understand it, we were not included in the conclusions.
(Mr Targett) That is my understanding as well. I think
one of the conclusions of the report was that we were not found
to be charging excessive prices in the areas in which we operate
so I do not think we got caught up in that.
(Mr Crosby) In the context of the SMEs Halifax was
excluded from that consideration because we were not in that marketplace,
but Bank of Scotland was included. It is important to emphasise
that the conclusion of the Commission was that in Scotland there
were no competition failings which required remedy. That was primarily
because of the traditionally fierce competition which takes place
between the three main Scottish banks.
382. I shall just refer to the Competition Commission's
report, volume 1, page 128 which says, "We have therefore
concluded that by virtue of the provisions of section 7.1 (c)
of the Act, Alliance and Leicester Bank, Girobank, AIB, Abbey
National, Bank of Ireland, Bank of Scotland, Barclays Bank, Clydesdale,
the Co-op Bank, HSBC, Lloyds TSB, Northern, RBS, National Westminster
and Ulster comprise a group of persons who . . .". So you
are included in it. What is your answer? Do you accept the Competition
Commission's view that you are engaged in a complex monopoly?
(Mr Harley) We are not subject to the remedies, so
to that extent I accept what you are saying. We, Abbey National,
have not been asked to apply the remedies.
383. I find it surprising that you do not know
you are included in that. It is very clear.
(Mr Harley) I apologise for my misunderstanding. My
response was meant to indicate that we are not subject to the
remedies, therefore we are not being asked to change our behaviour.
That was the only point I was trying to make and I do apologise
if I misunderstood you.
384. It is a complex monopoly and if you are
a complex monopoly, you have to change behaviour. Let us get it
on the record. You are now included and you did not realise you
were included. Now that you are included, do you accept the finding
that you engage in this complex monopoly? Yes or no. If you cannot
answer today, will you put it in writing to us? It just seems
amazing that you did not know that.
(Mr Crosby) What you said confirmed my position which
was that Halifax were not included, were not in that list. The
Bank of Scotland is included. They are very clear and there are
no price regulation remedies in Scotland because it was concluded
that there was adequate competition. To the extent that there
are remedies in Scotland, they are around portability and transparency
and we are 100 per cent behind those. In fact we have taken an
initiative to implement a number of those. To that extent and
at that level, yes, we accept the findings of the Commission.
385. You would accept the findings of the Commission.
(Mr Harley) May I just make the point again which
I was trying to make earlier. As I understand it, there were 10
practices against the public interest pursued by the four main
clearers and four others, which excluded Abbey National. With
that on the table, then of course I accept the conclusions of
386. We are looking for clarity and transparency
here. Give it to us.
(Mr Targett) My answer is similar. One of our banks,
Clydesdale, operates in Scotland and there are the same issues.
In terms of the behaviour remedies, we support them and are actively
working with them.
Chairman: So you all accept the Competition
387. When you were answering questions earlier
you said that you objected to price control because it limited
competition, it prevented you being distinct from the Big Four
banks. Is that correct?
(Mr Crosby) Unhelpful at the margin.
388. What level of interest do you pay on the
current accounts of small- and medium-sized businesses?
(Mr Crosby) We pay 2 per cent below base rate as a
standard on an average balance across our business banking customers.
It is about £10,000.
389. You pay more for business accounts than
you do for personal accounts.
(Mr Crosby) No, it is the same, 2 per cent below base.
It is already set at a level which is greater than the price regulation
and was in place before the report came out.
390. Correct me if I am wrong, but I have a
table here which suggests you pay 0.1 per cent on bank accounts
normally, but if it is going to rise to 2 per cent, it means the
account has to receive more than £1,000 a month.
(Mr Crosby) We pay base minus 2 per cent with a regular
credit of £500.
391. What do you pay on an ordinary account
without that guarantee of £500 or £1,000 coming in?
(Mr Crosby) We pay 0.1 per cent on personal accounts
if there is no £500 coming in.
392. What is the proportion of your accounts
where you pay the 2 per cent and what is the proportion where
you pay 0.1 per cent?
(Mr Crosby) We are paying the interest on a very high
proportion of the balances. Necessarily those customers who do
run balances on their current accounts make sure that they put
the £500 in so they take the benefit. We find ourselvesand
we are content with thispaying the full interest on the
vast bulk. I can get the number, but it is the highest proportion
because customers follow that.
393. It would be interesting if we could have
(Mr Crosby) Yes, we can follow that up.
394. Mr Targett, what about your two banks?
(Mr Targett) We have a series of accounts which do
pay at the lower end, at that 0.1 per cent level which you mentioned.
395. To small- and medium-sized enterprises.
(Mr Targett) There are various rates. I shall have
to come back with specific data in terms of what sorts of customers
with what rates. Our view would be that we have to meet the competition
and meet that price and we will do it.
396. What about the Abbey National interest
(Mr Harley) We pay 3 per cent on both retail and business
397. That is one of the rates, but the other
rate is 0.1 per cent, is it not?
(Mr Harley) That is right.
There are monthly credits.
398. What proportion of accounts receive 0.1
per cent and what proportion receives 3 per cent?
(Mr Harley) I shall have to get back to you with the
specifics on the split. It will move from month to month, but
I will give you the most recent figure.
399. What is the real objection to what has
been proposed by the Competition Commission, which, to remind
you, is that you either pay small- and medium-sized business current
account holders base rate less 2.5 per cent or you give them money
transmission free of charge or a choice between the two? What
is the real objection? Is it the level of this, because the rates
you are giving at the moment in many cases are not exactly generous,
are they? You could invest the current account balances at Bank
of England base rate.
(Mr Harley) We have no objection. We already offer
business customers free banking and 3 per cent in credit interest.
We are more than meeting the remedies already. We have no objections.
8 Note by Witness: Mr Harley's statement pertains
to personal bank accounts only. All Abbey National business bank
accounts pay the 3 per cent interest. Back
Ev 125. Back