Salvo against banks helps small firms

BRITAIN'S smaller firms will from today be able to claim compensation from banks dragging their feet in switching accounts under the latest 'Rip-Off Britain' salvo from the Government.

The eight major clearing banks have been set strict deadlines in which to transfer balances and cancel regular payment instructions to make it easier for small firms to shop around for better deals.

The move is the latest in a line of Government rules to force High Street banks to improve their business banking services. It comes almost two years after an exhaustive Competition Commission probe into the sector. Officials slammed the Big Four banks for making excess profits and claimed they operated a complex monopoly in the small and medium-size enterprises (SME) sector.

The Big Four were ordered to pay interest or provide money-free transmission services as a structural remedy, and today's rule change is the Commission's behavioural remedy. The eight banks - Barclays, Bank of Ireland, Bank of Scotland, AIB Group (trading in Northern Ireland as First Trust), HSBC, Lloyds TSB, National Australia Bank (through its subsidiaries Clydesdale Bank and Northern Bank) and the Royal Bank of Scotland Group - must provide details of a customer's regular payment instructions within three days of a request to switch, and transfer an SME balance within four.

Trade and Industry Secretary Patricia Hewitt said the rules would help to 'deliver a better deal for small business customers throughout the UK'.

The Office of Fair Trading will judge whether banks are adhering to the new deadlines but the level of compensation is being left up to each individual bank.