Press release

CMA issues two banks with directions on SME ‘bundling’ undertakings

The CMA has issued 2 banks, First Trust Bank and HSBC, with written directions to ensure they comply with existing requirements relating to banking services for SMEs.


Since a Competition Commission (CC) investigation concluded in 2002, 8 major banks in the UK have been prohibited by legally-binding undertakings from requiring small and medium-sized enterprises (SMEs) to open a business current account with them as a condition of obtaining a loan – a practice known as ‘bundling’. This safeguards customer choice and helps providers to compete effectively in SME banking.

During the course of its recent market study on SME banking, the Office of Fair Trading (OFT) became aware of concerns that some banks might be breaching these undertakings. As a result of these concerns, the 8 major banks agreed to carry out a detailed audit of their compliance with, and their staff’s awareness of, the undertakings.

Following its investigations, the Competition and Markets Authority (CMA) (which in April 2014 took over the OFT’s competition functions) has now concluded that 2 banks – First Trust Bank in Northern Ireland and HSBC – have breached the undertakings by indicating to some SMEs that opening an account with them was a condition for obtaining a business loan.

As a result, the CMA has issued detailed directions to First Trust Bank and HSBC to ensure that these companies and their staff comply with the undertakings. The audits also revealed that at 2 other banks there was relatively low awareness among relevant staff of this prohibition under the undertakings. All 8 banks will be required to carry out another audit and report to the CMA again by July 2015.

Alex Chisholm, CMA Chief Executive, said:

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.

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.

In the meantime, we would encourage SME customers to get in touch with us with any concerns they may have about the compliance of any of the 8 banks with these obligations.

Notes for editors

  1. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the CC and the competition and certain consumer functions of the OFT, pursuant to the Enterprise and Regulatory Reform Act 2013.
  2. Nine banks originally provided these undertakings in 2002. These were: AIB Group (UK) plc (known as First Trust Bank); Bank of Ireland; Barclays Bank plc; Clydesdale Bank PLC; HBOS plc (now part of Lloyds Banking Group); HSBC Bank plc; Lloyds TSB Bank plc (now part of Lloyds Banking Group); Northern Bank Limited (now known as Danske Bank); and The Royal Bank of Scotland Group plc (which also includes Ulster Bank Ltd in Northern Ireland). The 9 banks became 8 following the acquisition of HBOS plc by Lloyds TSB plc in 2009.
  3. On 11 March 2014 the OFT announced that, having received concerns about failure to comply with certain elements of the undertakings, it was in the process of investigating these concerns and that it had agreed a package of measures with the banks to improve information on the undertakings provided to bank staff and to assist the CMA in assessing compliance with the undertakings. As part of this package, each bank agreed to conduct, via its own internal auditors, an annual review of its systems and procedures for ensuring compliance. On 18 July 2014, the CMA announced that it was reviewing the first audit reports received from banks a week earlier.
  4. In the same statement, the CMA announced its intention to carry out a full market investigation into the markets for both personal current account and SME banking. The CMA expects to make its decision on whether to do so later in the autumn.
  5. Enquiries should be directed to Rory.Taylor@cma, or or by ringing 020 3738 6798 or 020 3738 6460.
  6. For CMA updates follow us on Twitter @CMAgovuk, Flickr and LinkedIn. For case updates sign up to our daily email alerts.
Published 22 October 2014