HSBC and First Trust Bank breached SME Loan Rules, says UK regulator

HSBC Holdings plc and First Trust Bank of Northern Ireland breached loan rules by forcing SME’s that were applying for a loan to open a business account first, says the Competition and Markets Authority (CMA), the UK antitrust regulator.

SMEs are small and medium-sized enterprises.

The CMA had carried out a probe involving eight banks operating in the UK, and concluded that HSBC and First Trust Bank had “breached the undertakings by indicating to some SMEs that opening an account with them was a condition for obtaining a business loan.”

The CMA says it has issued detailed directions to HSBC and First Trust Bank to make sure these financial institutions and their employees comply with the regulations.

The CMA’s investigation also found that there was low employee awareness regarding the regulations at two other banks.

The regulator has told the eight banks to carry out another audit and report their findings by July 2015.

CMA Chief Executive, Alex Chisholm, said:

“Breach of these undertakings is a serious matter and we have directed First Trust Bank and HSBC on the actions they must take to immediately correct the situation – so that it is clear to both their staff and their SME customers that obtaining a business loan is not dependent upon opening an account.”

“Although all 8 banks have recognized the importance of complying with the undertakings and are taking steps to address this, when breaches occur we need to ensure that there will be full compliance. In addition, all 8 banks will need to show that they have the correct systems in place to ensure that ‘bundling’ will not occur in the future, and we are requiring a further audit next year to confirm this.”

“In the meantime, we would encourage SME customers to get in touch with us with any concerns they may have about the compliance of any of the 8 banks with these obligations.”

An HSBC spokesperson said his company regrets that it was not fully compliant with the undertakings. He added that HSBC will be working with CMA to execute a plan to make sure it becomes fully compliant with the requirements.

First Trust Bank says it has implemented several changes to its policies and procedures to make sure it complies with the regulations in the future.

The CMA is the UK’s main competition and consumer authority. It is an independent government department which investigates mergers, markets and the regulated industries. It also enforces competition and consumer law.