The Competition Commission has ruled that NI banking is uncompetitive and acts against consumers' interests. We told you so!
In June, I wrote Northern Ireland's Banking Scandal in order to expose the incredibly poor current accounts, credit cards, personal loans and savings accounts on offer in Northern Ireland.
The problem with the personal banking set-up in NI is that it is dominated by these four local banks (which own almost all of the bank branches and have a massive market share of banking customers):
- Bank of Ireland (NI);
- First Trust (owned by Allied Irish Banks);
- Northern Bank (owned by Danske Bank Group of Denmark); and
- Ulster Bank (owned by Royal Bank of Scotland).
Although other banks are working on gaining a toehold in this market, there is a serious lack of competition for current accounts in NI. Customers also find it difficult to compare charges and products, which deters them from switching banks. Thus, the 1.7 million people in Northern Ireland get a rough deal, as they are forced to choose from a range of high-charging, poorly performing products and services. Shame!
Now for the good news: in the findings of an inquiry released last week, the Competition Commission agreed with my criticisms. It concluded that competition for personal current accounts in Northern Ireland is restricted, thanks to unclear charges, complex charging structures, and reluctance among customers to switch providers. This leads to customers paying higher charges and earning lower levels of interest than they might expect in a fully competitive market.
During the course of the Competition Commission's ongoing investigation, three of these four banks have launched, or are about to launch, bank accounts which charge no fees while customers remain in credit or have an authorised overdraft. However, these banks have also whacked up the cost of unauthorised borrowing to boost their profits, so they've given with one hand and taken with the other!
The Commission believes that the four above-mentioned clearing banks enjoy a competitive advantage from their extensive branch networks, which makes it difficult for non-clearing banks to gain market share from them. It also found some evidence of prices moving in unison in the past, although it found no concrete proof of a banking cartel being operated.
The Commission is now considering how to remedying the shortcomings in the Northern Irish banking market. However, I suspect that its recommendations will be limited to better information about charges and choices, which will let the four big players off the hook. Personally, I'd throw the book at these banks for abusing their customers over the course of decades, but I don't make the rules. However, I would say the following to our friends in Northern Ireland:
- Not all current accounts are the same -- and you can make big financial gains by switching to a Best Buy current account.
- Switching bank accounts is neither risky nor difficult. In fact, thanks to an improved Banking Code, it's never been easier.
- Happily, the Internet knows no geographical boundaries, so the new generation of telephone-based and online current accounts are at your fingertips.
In summary, if you're unhappy with your existing bank, vote with your feet by moving your current account to one of its rivals -- and the same goes for your credit card, mortgage, personal loan and savings account. To be honest, it won't be too hard to beat the dreadful deals on offer from Northern Ireland's "Gang of Four"!
More: Find better current accounts, credit cards, mortgages, personal loans and savings accounts today!