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OFT raises competition concerns over SME finance

The Office of Fair Trading has raised concerns there is a lack of competition in the banking services offered to small and medium-sized enterprises.

The OFT is being disbanded on 1 April. The FCA will take over consumer credit regulation while new body, the Competition and Markets Authority, assumes the OFT’s competition and consumer role.

The OFT first set out plans to probe the retail banking sector, and SME banking, in July 2012.

In an update on its SME banking study, published this week, the OFT says the provision of business current accounts is concentrated among a small number of banks; that smaller banks and new entrants face barriers to entry and SMEs rarely shop around for providers. 

The OFT says banks delay providing documents to allow SMEs to source finance from alternatives such as peer to peer lenders. It has also started an investigation into possible non-compliance with a 2002 Competition Commission review, which stated banks should not require businesses to hold a current account in order to access a business loan.

OFT chief executive Vivienne Dews says: “Further action will follow if concerns in these areas are not addressed.”

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