Kroes also targets retail banking

Barriers to competition and market failures will be named at the end of this month (31 January), when Competition Commissioner Neelie Kroes releases the final results of her sectoral inquiry into the retail banking sector.

Launched in 2005, at the same time as the business insurance investigation (see above), the retail banking inquiry looks at conditions for market entry, the degree of choice available to consumers and, most controversially, the so-called interchange fees charged to users of payment cards.

"The Commission wants to see why there is not much cross-border activity in the retail banking sector," said Hans-Jörg Niemeyer, a partner at law firm Hengeler Mueller, who has advised on the inquiry.

"Either national banks are protected or it is the behaviour of customers who only go to their local banks," he said. "The retail market is still a very local market. But, it could also be [due to] different tax rates and different civil laws."

Interim results released by the European Commission in April last year did not identify serious breaches of competition law. Niemeyer believes that action taken by the Commission after final results are published could take the form of ‘soft’ measures.

The subject of interchange fees will prove to be the thorniest issue. Kroes indicated in April that the fees would have to be reduced drastically. Credit card firm Visa has been campaigning vociferously, claiming that its investments into infrastructure for the Single Euro Payments Area (SEPA), the electronic payment system covering the eurozone which is set to be launched in 2008, could be in jeopardy.

The Commission charged MasterCard in June last year with fixing the price of its retail fees. "Interchange fees are indispensable for card payment systems. We don’t earn any revenue from the fees. They are not going through our books," protested Etienne Goosse, general manager of corporate affairs at MasterCard Europe. "Interchange fees are needed and we will definitely fight to keep them.

"Banks are asked to invest money in SEPA. If, at that same time, business [models] are being [turned] upside down, banks will ask: how can we invest? The Commission is throwing the baby out with the bathwater."

Barriers to competition and market failures will be named at the end of this month (31 January), when Competition Commissioner Neelie Kroes releases the final results of her sectoral inquiry into the retail banking sector.