RBS 2014 Annual Report Download - page 116

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
UK personal current accounts/retail banking
Following the OFT’s publication of a market study report into the Personal Current Account (PCA) market in
July 2008, the OFT launched a follow up review of the PCA market in July 2012. This review was intended to
consider whether certain initiatives agreed by the OFT with banks in light of the July 2008 report, primarily
around transparency, unarranged overdrafts and customers in financial difficulty, had been successful and
whether the market should be referred to the Competition Commission (CC) for a fuller market investigation.
The OFT’s PCA report following this July 2012 launch was published in January 2013. The OFT
acknowledged some specific improvements in the market since its last review but concluded that further
changes were required to tackle ongoing concerns, including a lack of switching, the ability of consumers to
compare products and the complexity of overdraft charges. The OFT decided not to refer the market to the
CC but said that it expected to return to the question of a referral to the CC in 2015, or earlier. The OFT also
announced that it would be carrying out behavioural economic research on the way consumers make
decisions and engage with retail banking service, and would study the operation of payment systems as well
as the SME banking market.
On 11 March 2014, the CMA announced that in addition to its pending SME review (see below), it would be
undertaking an update of the OFT’s 2013 PCA review. On 18 July 2014 the CMA published its preliminary
findings in respect of both the PCA and SME market studies. The CMA provisionally decided to make a
market investigation reference (MIR) for both the PCA and SME market studies. The provisional decision on
both PCAs and SMEs was then subject to a consultation period until 17 September 2014. Following this
period of consultation, on 6 November 2014, the CMA made its final decision to proceed with a MIR. The
MIR will be a wide-ranging 18-24 month Phase 2 inquiry. At this stage as there remains considerable
uncertainty around the outcome of these reviews it is not practicable reliably to estimate the aggregate
impact, if any, on RBS which may be material.
SME banking market study
The OFT announced its market study on competition in banking for SMEs in England and Wales, Scotland
and Northern Ireland on 19 June 2013. Following a consultation on the scope of the market study, the OFT
published an update paper on 27 September 2013 setting out its proposed scope. On 11 March 2014, the
OFT set out some competition concerns on SME banking and also announced that the CMA would continue
the review. As discussed above, the CMA has decided to make a MIR for the SME market study in addition
to the PCA study. As regards SMEs, the CMA concluded that it would be more appropriate to make a MIR
than accept a set of undertakings in lieu put forward by RBS, Barclays, HSBC and Lloyds. Alongside the
MIR, the CMA will also be reviewing the previous undertakings given following the CC’s investigation into
SME banking in 2002 and whether these undertakings need to be varied. At this stage as there remains
considerable uncertainty around the outcome of these reviews it is not practicable reliably to estimate the
aggregate impact, if any, on RBS which may be material.
Williams & Glyn
On 28 May 2015 HM Treasury asked the CMA to assess the likely impact of the latest proposals for the
divestment of Williams & Glyn for competition in the UK banking sector. On 24 July 2015 HM Treasury
announced that it had asked the CMA to delay finalising its advice until later in the year. At this stage the
outcome of the review cannot be predicted. As a result there is a risk that the CMA might recommend
changes to the current Williams & Glyn divestment plan.