Bank probe uncovers a small gap

THE Competition Commission's report into small business banking has thrown up an extraordinary gap between the way banks define small and medium-sized enterprises and the definition used by the Commission.

Barclays, HSBC and Royal Bank of Scotland define SMEs as having turnover of less than £1m a year and small firms as turning over less than £100,000. Lloyds TSB uses £10m as the cut-off point. But the Commission says businesses with annual revenues of up to £25m should be categorised as SMEs.

The differential is particularly problematic because the banks are now being asked to pay interest on all SME current accounts. They will be asking the Director General of Fair Trading, who has been charged with ensuring the commission's proposals are implemented, whether they can use their own definitions or have to adopt the £25m threshold.