Report on investigation in the area of providing financial services to public, small and medium sized enterprises and to local municipalities in the Slovak Republic

06.05.2014
The Antimonopoly Office of the Slovak Republic made a detailed analysis of the financial sector representing one of the most important driving sectors of economy. Some markets in the area of providing financial services are characterised by stable structure and higher degree of concentration what may indicate lower intensity of competition.

Within the investigation the Office focused on conditions of providing certain financial bank products to public, small and medium sized enterprises and to local municipalities since these clients are characterised by information asymmetry and lower bargaining power. The Office has been investigating whether the banks tie provision of selected types of credits for population, small and medium sized enterprises and local municipalities to current account in the bank providing credit. Tying may weaken competition in the area of providing financial services through higher switching costs and lower transparency of prices what may result in decreased mobility of bank clients and higher barriers to entry for new providers of financial services (mainly for those specialised in one product).

The Office concluded the following:

  • The Office considers as positive that the mortgages and consumer credits to public are not tied to a current account. Through the systems of various rebates (for example lower interest rate of credit) and other advantages banks motivate consumers to take a package of credit and current account. If a client decides to cancel the current account in the bank where he/she pays the credit, he/she would be confronted with obstacles, mainly with administrative and financial costs (banks are used to apply a fee for change of contractual conditions of the credit contract) and it lowers the clients´ mobility.
     
  • Practice of tying a credit of small and medium sized enterprises with a current account is quite common – share of banks in the market of credits for small and medium sized unde enterprises using this practice was 63% in 2012.
     
  • In the case of providing credits to local municipalities the share of banks providing credits to local municipalities together with a current account was 59% in 2012.
According to its strategy and prioritisation policy and within the application of competition advocacy the Office called banks to:
  • refrain from the practice of tying provision of credit to small and medium sized enterprises to the current account in the bank,
     
  • not to tie the provision of credit to local municipalities to a current account in the bank providing the credit,
     
  • provide its clients with all information necessary for evaluation of particular competitors´ offer transparently, including information on conditions and fees for possible change of contractual conditions agreed upon in credit contracts, cancellation of current account etc.,
     
  • decrease information asymmetry between banks and their clients and to minimalise administrative burden on clients for change of monitored financial services provider.
Given the relatively stable high concentration of the market in the area of providing selected bank products and lower bargaining power of some types of banks´ clients the Office will continue in active monitoring and evaluating of conditions of providing bank products to these consumers.
Last update:04.06.2014