Banks breached competition rules

Four Major High Street Banks Breach CMA Rules: A Comprehensive Review

On July 25, 2024, the Competition and Markets Authority (CMA) revealed that four major high street banks—HSBC, Lloyds, TSB, and Allied Irish Bank (AIB)—have breached retail banking rules designed to protect consumers. These rules were established under the Retail Banking Market Investigation Order 2017, following the CMA's identification of competition concerns in the retail banking sector.

Retail Banking Market Investigation Order 2017

The Retail Banking Market Investigation Order 2017 was implemented to address various competition issues within the retail banking market. The Order imposes strict requirements on banks and building societies to ensure transparency and accuracy in informing customers about their products and services. Key provisions of the Order include:

• Accurate disclosure of interest rates for loans.
• Correct display of branch and ATM locations.
• Implementation of ‘Open Banking’ standards for secure and transparent data sharing.

Open Banking Initiative

A crucial aspect of the Order is the Open Banking initiative, which sets high standards for data sharing. This initiative allows third parties to access a wide range of data on banking products and services, fostering innovation in the development of apps and improving services such as comparison sites. Open Banking aims to make it easier for customers to choose the right bank by providing clear and accurate information.

Breaches by HSBC, Lloyds, TSB, and AIB

The CMA's investigation revealed that HSBC, Lloyds, TSB, and AIB failed to comply with the Order in various ways:

• HSBC: The bank did not maintain accurate and up-to-date information about its branches, with 167 closed branches listed as open and two open branches unlisted. HSBC also failed to keep accurate annual rates for business loans and overdrafts on its website and provided incorrect maximum overdraft charges to some customers.
• TSB: The bank did not disclose the maximum amount customers would be charged for going into an unarranged overdraft on their Personal Current Accounts.
• AIB: The bank did not provide the correct annual rates for some loans and overdrafts through Open Banking and on its website.
• Lloyds: The bank failed to make available the addresses of 363 ATMs through Open Banking.

Response and Remedies

Compliance with the Order is strictly monitored by the CMA, which requires banks to report any instances of non-compliance within 14 days. Following the breaches, Lloyds, TSB, and AIB have confirmed they are taking steps to prevent further violations. These measures include enhancing internal procedures, improving oversight by senior managers, updating internal checklists, and retraining staff.

HSBC, which the CMA identified as having more extensive breaches, has been directed to implement additional measures. The CMA issued detailed directions to HSBC, including the creation of an action plan to ensure full compliance in the future.

CMA's Stance and Future Monitoring

Dan Turnbull, Senior Director at the CMA, expressed disappointment in the banks' failures to comply with the rules, especially highlighting HSBC's repeated breaches. He emphasised the importance of accurate information for customers making financial decisions and stressed that banks must have adequate processes in place to ensure compliance.

Turnbull stated, "People deserve banks they can trust to serve them well. Having correct information is essential when making important decisions about our finances. Banks handling our hard-earned money should have adequate processes in place to ensure this happens."

The CMA will continue to closely monitor all banks' compliance to ensure customers can manage their finances clearly and confidently. Formal enforcement measures have been put in place to secure better compliance from the banks involved, particularly HSBC.

Conclusion

The breaches by HSBC, Lloyds, TSB, and AIB underline the importance of the CMA's regulatory framework in ensuring transparency and competition in the retail banking market. As the CMA continues to monitor and enforce compliance, banks are expected to adhere strictly to the rules to provide customers with accurate and reliable information about their financial products and services. The CMA's actions serve as a reminder of the ongoing need for vigilance and accountability in the banking sector.