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IC45 - Banks: Antitrust, there is room to reduce the costs of current accounts. Possible savings of up to €180 but citizens need to be better informed.


PRESS RELEASE


BANKS: ANTITRUST, THERE IS ROOM TO REDUCE THE COSTS OF CURRENT ACCOUNTS. POSSIBLE SAVINGS OF UP TO €180 BUT CITIZENS NEED TO BE BETTER INFORMED.

Despite a more competitive development of the sector, inter-bank mobility and the application of more favourable terms within the same institution are still low: regulatory measures are necessary to promote awareness among savers. The higher prices are charged by banks where 70% of current accounts are concentrated. A confirmation of the advantage of on line accounts where costs have fallen to a greater extent than costs at the counter

There are still obstacles to the complete unfolding of competition in the banking sector that prevent a reduction in costs to the benefit of the final consumer and an increase in the mobility of demand. This is the conclusion reached by the Autorità Garante della Concorrenza e del Mercato which refers to the possibility of saving up to €180 in the cost of keeping a current account.

According to the Antitrust, in recent years we witnessed some changes in policies adopted by operators and, in some respects, an even more competitive development of the sector: we have in fact witnessed changes in the market structure and in the competitive environment (with various mergers that involved several credit institutions) while reforms of secondary legislation in matters concerning transparency and disclosure on banking services have also produced results. The amount of savings that may be achieved by transferring from one account to another, however, shows that there is still room to reduce the costs of current accounts. Nonetheless, savers are unable to take advantage of these possibilities because they lack the information that is necessary and that should instead be made available by the banks, even by means of the introduction of regulatory limits and standards. According to the Antitrust Authority, it is also necessary to intervene with regard to delay in the closure of an account so as to open another one: however, although the interval has been reduced, it is disrespectful to have a credit card or a Viacard and yet see the period extend even up to 37 days. Finally, links between current accounts and other products should also be split up.

From the survey launched in March 2011 to assess the increase in current account costs in comparison with 2007, the year of the previous survey on this issue, it emerges that prices only fell for certain types of account holders and for certain periods. The survey sample consists of 52 banks and more than 14,500 bank counters, with a representation of 44% in terms of bank counters. Costs were measured on six different profiles of account holders through a synthetic index of costs, an information tool that makes it easy and straightforward for consumers to make price comparisons for the different types of accounts.

PRICE REDUCTIONS IN BANK COUNTERS AVAILABLE ONLY FOR YOUTHS

A substantial reduction in median prices relative to over-the-counter accounts was registered only in respect of youths (-19%) while a less significant drop was recorded for families and pensioners with smaller operations (-2.8% and -3.6%, respectively), even though when considering the absolute value of the ISC, these reductions do not appear to be of particular importance. Median prices remained unchanged even for the other types of consumers, with the variation from 2007 being even less than 1%.

In contrast costs rise, especially for some profiles, in the larger banks where 70% of current accounts are concentrated. Depending on its use (and therefore on the profile of the account holder), the cost to keep and to handle a current account ranges from a minimum of €53 to a maximum of €111.

ONLINE ACCOUNTS ARE MORE CONVENIENT

The survey confirms the convenience in absolute terms (-30%) of online accounts compared to traditional ones, with high points that exceed 40% for youths and families and pensioners with a larger amount of banking operations.

MOBILITY IS STILL LOW

The rate of mobility of current account holders, which represents the share of open and closed current accounts out of the total, lies between 10% and 12%, in line with results that are prevalent at a European level and to a large extent stable over the years. The result is a high degree of price differential: with regard to on-the-counter accounts the difference between the maximum and the minimum price amounts at least to €100 but can also be higher than €150, reaching up to €180, according to the profile of the current account holder.

Despite these differences the degree of customer loyalty remains very high and the tendency to renegotiate conditions even within the same bank remains low.

THE INCOME BASE ACCOUNT DOES NOT TAKE OFF

The survey shows that the attempt to make the Income Base Account more widely available, an initiative launched by the Government in 2011 to promote the fight against cash holdings and to encourage financial inclusion, is very negligible: far below 1% of the total number of current account holders in each bank, with banks having no current account holders for such a basic service. It is probably quite likely that the vague offer conditions and the price structure that cannot be calculated immediately have contributed towards this failure to take off. For 34% of the banks that are included in the sample, there is at least one current account for youths and families with a high operational profile with a price that is lower or equal to that of the Income Base Account that is generally offered to consumers.

NECESSARY INTERVENTIONS

According to the Antitrust Authority, in order to intensify the commendable competitive dynamics aimed at the reduction of costs and at higher consumer welfare, measures need to be taken on three fronts:

1) enhance the level of transparency of information. In particular, forms of communication of the Synthetic Index of Cost (Indicatore sintetico di costo, ISC) should be reconsidered. Only in this way the Index, introduced by the Bank of Italy in 2010 and proposed by the Antitrust Authority in 2007, may represent a useful tool to compare the different offers available on the market. For this purpose the survey proposes that use should be made of ATMs where clients may be able to find the best deals offered by their banks. The same information should be found in the ATMs of competitor banks with the aim of rendering the search for the best conditions simple and quick. Banks should, moreover, be obliged to inform their clients, at least on an annual basis and with adequate written information, on the new accounts that are available and on the availability of offers that are on better terms. Finally, one or more search engines that operate independently of the banks should be developed that would allow comparisons to be made between different accounts.

2) break the existing link between current accounts and other banking services. In particular, according to the Authority, it is necessary to ensure the elimination of all constraints, contractual or real, that are not necessary between current accounts and other services such as mortgage, asset administration and insurance policies. On their information leaflets and in their regular communications, banks should make it clear that in order to make use of banking service accessories it is not compulsory to hold a current account at the bank.

3) reduce the time needed to close a current account.

The Antitrust Authority proposes to make it compulsory to close an account within 15 days, in line with the provisions of the proposed EU directive currently under discussion. In order to facilitate the closure of accounts even when there are instruments that involve cancellation fees (credit cards and Viacard), one would expect the new bank to replace the old bank in the assumption of all eventual risks.

 

12th September 2013