Big Four pre-empt clampdown on business banking

The UK's largest banks have clubbed together to take evasive action against forthcoming regulation in small business banking by drafting a voluntary code to pre-empt a tougher rulebook expected to be suggested by the Government.

The revelation comes as the mortgage bank Abbey National today renewed its assault on the so-called Big Four banks' stranglehold on the sector, announcing the creation of 600 jobs in small business banking. Some 83 per cent of the market is held by Royal Bank of Scotland, Barclays, HSBC and Lloyds TSB.

They are concerned that the Government may introduce draconian regulation when it responds later this month to the findings of the Competition Commission's 17-month probe into small business banking, which was completed in October.

While the Commission is thought to have shied away from extreme proposals such as forcing banks to pay interest on current accounts, it is likely to recommend a voluntary code of conduct containing benchmarks for the time taken to transfer accounts to rivals, as well as obligations to advertise rival bank's offerings.

But the banks, working through trade bodies such as the British Bankers Association, have already produced a code of their own. A banking analyst familiar with the plans said they were a straightforward rendition of the existing banking code for personal customers, with additional commitments to dealing more sensitively with small businesses who have got into troublesome debt, as well as a proposal to exchange information about customers wishing to change banks within five working days.

However, there is not thought to be any commitment to extending the automated account switching system already in place for personal customers.

Barclays said yesterday that it had "studiously" avoided talking to its rivals. Other members of the Big Four declined to comment.

Abbey said today that it would launch a new small business current account early next year, and was recruiting 500 staff to service the product, with a further 110 in asset financing and administration. Last week HBOS launched a small business current account paying 2.0 per cent interest.

The HBOS initiative will cost the bank £29m, including £20m for repricing the accounts of BoS's 100,000 business customer. Halifax will launch its small business account in January.