HSBC 2005 Annual Report Download - page 19

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Despite these developments, competition in the
retail banking sector for the best customers remained
intense, with pressure on credit products, interest
margins and, in particular, deposit rates.
The high level of personal indebtedness and
strong competition within the retail banking and
consumer finance sectors led regulatory authorities
to continue to monitor closely the financial services
sector.
In December, the UK Competition Commission
released its provisional remedies to improve
competition following its investigation into the
US$8.3 billion store card industry. HSBC continues
to co-operate with the Commission as the inquiry
draws to a conclusion.
Also in 2005, the Office of Fair Trading (‘OFT’)
continued with its inquiry into credit card terms
under the Unfair Terms in Consumer Contracts
regulations. HSBC has made various submissions to
the OFT and discussions continue.
The OFT also published its decision on the
multilateral interchange agreement between
MasterCard members in October. MasterCard has
appealed against the decision to the Competition
Appeals Tribunal. Visa is also subject to
investigation but the case is suspended pending
resolution of the MasterCard case.
In November, the Financial Services Authority
published the results of its themed review of the sale
of Payment Protection Insurance. It has expressed
concerns regarding some practices which were
common within the industry. HSBC has not received
a negative response in respect of its own procedures,
but will be considering its products and sales
practices in the light of the findings. The OFT will
be undertaking a market investigation into Payment
Protection Insurance following a super-complaint
from the Citizens’ Advice Bureau.
Throughout 2005, a Payments Task Force
chaired by the OFT has brought together
representatives of the banking industry, consumer
bodies and business with the Bank of England and
HM Treasury to look at various aspects of the
payments system. Its first report recommended that
the payment industry implement a faster means of
making low cost electronic payments. HSBC agrees
that this is in the consumer’s interest and favours its
early implementation.
The Consumer Credit Bill, currently in its
second reading in Parliament, updates existing
consumer legislation in order to provide better
consumer protection, and is likely to come into force
during 2006.
HSBC’s policy is to co-operate and work
positively with all its regulators, inputting data and
perspective on those issues which affect all financial
service providers via industry bodies.
France
Stable interest rates in the euro zone contributed to a
strong growth in real estate investment in France.
Competition between French banks was
concentrated on the promotion of real estate
mortgage loans, which are the principal means by
which new customers in France are acquired. Market
activity increased and consumers enjoyed improved
pricing to the detriment of bank margins throughout
2005.
The payment of interest on sight deposits, which
has only been permitted since the beginning of 2005,
was introduced by one major mutual French bank.
This move did not provoke a widespread reaction in
the domestic market and, to date, no other leading
French bank has followed suit.
In December 2005, Banque Postale (a subsidiary
of the French Postal service) received the necessary
regulatory approvals and with effect from January
2006 will be able to offer real estate mortgages and
financial services, including the sale of investment
products manufactured by third party providers.
Given the scale of Banque Postale’s geographical
coverage, this will increase competition in an already
competitive market.
The French government has reformed tax law
for 2006/2007 with two measures which will
increase disposable income for high income
individuals: a tax exemption on capital gains on
equities held for more than eight years, which brings
the French taxation regime into line with practices in
many other European countries, and a cap on total
household taxes at 60 per cent of income. This will
boost one of the market segments on which HSBC
France focuses.
At the end of December, French banks were
granted approval, as in the UK, to provide equity
release mortgages. This will assist customers to
invest in real estate and finance consumption.
Hong Kong
While fierce competition in traditional core banking
products remained evident in Hong Kong, the rising
cost of funds in the second half of 2005 from
increasing interbank rates made banks with smaller
deposit bases more cautious in price competition. A
decline in property loan demand also added pressure
on banks to look for new outlets for lending.
Personal loans, including credit card advances,