EU to pressure banks on prices

Neelie Kroes is preparing to take action against European banks that she believes are charging too much.

The EU competition commissioner has been investigating the retail banking sector and her report, due on Wednesday, is expected to name and shame companies that have kept charges artificially high.

In particular, the Dutch commissioner is keen to clamp down on the high cost of card transactions.

The charges linked to cards of the same type differ greatly according to the country – costs in Finland, for example, are far lower than in Portugal or the Czech Republic.

Kroes is expected to stop short of calling for all card fees to be scrapped or harmonised, but is still thought to be considering what action to take.

Some credit card companies – including both Visa and Mastercard – had feared that Brussels would impose tough sanctions, in particular the scrapping of interchange fees, the charges levied on banks for processing transactions.

Kroes has attacked such fees in the past, but card issuers have warned that abolishing fees could lead to card services being withdrawn altogether.

The commission’s report is also expected to criticise some member states for their often arcane rules on the issuing of cards.

France, for example, has only recently agreed to scrap a law that states that cards cannot be co-branded – in other words, French retailers cannot combine their own store cards with general Visa cards.

Other countries insist that only banks or credit institutions can issue cards, and this is one area where Kroes is expected to propose major changes.

She argues that obliging companies wishing to issue cards to be banks is stopping new entrants from joining the market, not least as the banking sector continues to consolidate into a handful of major players.

The widespread system of co-operative or franchised banks – such as the Banque Populaire in France or the majority of Belgian banks – is also likely to be criticised.

Kroes is concerned that many of these banks are acting against the needs of consumers by agreeing to carve up territory between them.

This can mean that customers of the same bank do not have access to the same level of services when not in their home region.

Finally, the EU executive is expected to highlight the lack of mobility in the EU banking sector, with the high cost and complication of switching banks seen as a major barrier.

Kroes is likely to call for changes to rules such as the obligation to open a current account before being granted a loan, or banks offering a range of services for free but hitting customers with large charges if they choose to switch providers.

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