FSB reaction to the Independent Commission on Banking Interim Report

The Federation of Small Businesses (FSB) has welcomed the report from the Independent Commission on Banking (ICB), into the banking sector and urges the Government to look closely at its interim recommendations in order to open up competition in the sector.

Commenting on the report, John Walker, National Chairman, Federation of Small Businesses, said:

“The report provides a measured view of the issues that face the banking sector in the UK. The FSB has called for more competition in the banking sector for over a decade and urges the Government to be bold and use this opportunity to bring greater competition to the sector.

“With the big four banks holding almost 90 per cent of the market, it is imperative that we see a radical shift which allows greater competition to properly benefit the small business community. Only more competition will provide better service, better products and drive prices down.

“This report is just the beginning of the process and the Government and the ICB must remain strong to ensure that between now and the publication of the full report in September that the banking sector gets on a stable footing.”

Commenting on specific areas of the report, John Walker, National Chairman, Federation of Small Businesses, said:

Ring-fencing:
“We welcome the idea of separating different arms of the banks as for the most part, small businesses have little alternatives than their bank for vital financial services. Through making retail and investment parts of the bank financially separate it will help to provide a continuous service for small firms in the event of a problem within another arm of the bank, meaning that the retail arm can continue to lend and that deposits held should be safe.”

Branches:
“The sell-off of additional branches by Lloyds HBOS should be inextricably linked to the arrival of new entrants to the market. The FSB would be concerned if the branches were sold to other big players as this would not help to open up competition.

However – although the IBC is aware that the barriers to the formation of new banks need to be broken, there is nothing in the report which talks about incentivising new entrants to the market. This needs to be remedied if we are to see the end of the long-standing monopoly in the banking sector.

“Bank branches are important for small businesses – 60 per cent visit their branch once a week and one in 10 visit every day. The idea new entrants being able to utilise the existing network would greatly benefit small firms as well as opening up competition.

“One thing the FSB has long called for the a Post Bank to be established through the Post Office network and we urge the Chancellor to consider this recommendation to better serve small businesses locally.”

ENDS

Notes to Editors

1. The FSB is Britain’s leading business organisation with over 210,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business.

More information is available at www.fsb.org.uk

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Contacts

Andrew Cave, Chief Spokesperson: 07917 628991
Prue Watson: 020 7592 8121/ 07825 125695 prue.watson@fsb.org.uk
Sara Lee: 020 7592 8113/ 07595 067068 sara.lee@fsb.org.uk

For regional FSB contacts please go to www.fsb.org.uk