In a recent report, the Competition Authority found that competition in the banking and finance markets is still weak, and that customers' possibility to switch banks is limited due to various lock-ins. Policies should aim towards providing customers with optimal conditions in order to choose services and products and towards efficient regulations for a well-functioning competition.
On its own initiative, the Competition Authority has examined competition in the financial services sector, focusing particularly on deposits, mortgages and investment funds.
The findings show that banks' interest rates on deposits are of little significance to customers when choosing a bank. Customers remain faithful to their bank despite the fact that competing banks may offer higher interest rates. The report also shows that fund- fees are stable and lack competition. Furthermore, the report shows that the bank’s gross margins for mortgages have increased and that borrowers are placed in a weaker negotiating position.
"The results confirm our earlier view of the market where competition is weak and where the customers’ position in relation to the banks needs to be strengthened. We would like to see more effective rules which give the customers a real possibility to play banks and fund companies off against each other," said Dan Sjöblom, Director-General of the Competition Authority.
"It is important to reduce lock-in effects on customers. An improved possibility to make rational decisions increases the possibility to change banks. In turn, this strengthens competition, which is a good thing for customers," said Dan Sjöblom.
The Competition Authority has put forward a number of proposals in order to make the regulatory framework more effective and decrease the lock-in effects for customers. An additional aim of the proposals set forth relates to increasing customers’ possibility to receive information that is relevant and easily accessible.
The following suggestions are a few examples of those presented by the Competition Authority:
- Review the method of calculating mortgage interest differential compensation in order to reduce the lock-in effect on customers.
- Investigate the possibility of exempting locked capital (in funds) from gains taxation when transferring capital to an investment savings account in order to increase customer mobility.
- Investigate which authority should have the responsibility for the interbank reference rate Stibor.
- Strengthen regulation on financial advice.
- Investigate a possible ban on price signalling between banks.
- Urge banks to account for their costs of mortgages in an equal manner in order to make it easier for customers to negotiate their loans.
- Introduce compulsory measures to compare investment fund distributors in order to benefit customers.
For further information, please contact:
Jimmy Dominius, Press Officer, tel.+46 (0) 8 700 15 80 or
+ 46 (0)76 542 15 80
John Söderström, Project Manager, tel. +46 (0) 8 700 16 60