Inquiry set to stir up Dutch bank fees system

Date: 20/02/1997

DUTCH banking charges could be poised for a shake-up following a probe by European Commission competition officials into the country's system for settling inter-bank payments.

Dutch banks are likely to be told in the next few weeks that they will have to accept Commission conditions, if a system under which Netherlands' banks share payment costs equally is to escape legal action in the European Court of Justice for alleged anti-competitive practices in breach of Union rules.

Commission officials say the new conditions should reflect a fresh approach to dealing with the thorny issue of payment systems. At the moment, Dutch banks operate a so-called Mutual Interchange Fee (MIF) system, under which the client's own bank and those into which sums are paid share the processing costs associated with payments.

This prompted protests to the Commission from the customers of creditor banks (those to whom payments are made) who were angry at being forced to share the cost of services from which they did not directly benefit.

Customers were faced with increased charges after all the country's creditor banks decided to pass on the full costs of the MIF directly to their customers, even though they were not formally obliged to impose such rates. The payments system covers the entire Dutch banking sector.

Now competition officials are likely to spell out that creditor banks do not have to accept this charging arrangement, in a move which they hope will act as a catalyst for change and the start of new negotiations between banks, bringing a rebalancing of costs towards debtor banks.

The Commission will also demand that Dutch banks give their customers more details about what they are being charged for.

These conditions for clearance of the MIF follow over three years of on-and-off negotiations between Commission officials and the Dutch banks on the issue.

In 1993, the Commission issued a statement of objections giving a strong warning that the MIF was not indispensable for settling inter-bank payments. It added that a looser arrangement had existed previously and the new system was the result of lobbying by just one powerful bank.

Dutch citizens make heavy use of their banks to make regular payments such as electricity and phone bills, insurance premiums and magazine subscriptions.

Creditor banks pay a uniform 0.14 ecu to debtor banks for every payment that is made. This charge was fixed after estimating the handling costs of the most efficient debtor bank.