Parliament pushes for Ryanair model for banks

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The European Parliament will today (5 June) endorse a report calling for more transparency of banking costs and suggesting a sort of Ryanair model for retail banks, based on increased provision of untied services instead of packets. Gianni Pittella, the European Parliament rapporteur for the proposal, spoke to EURACTIV in an interview.

In the sectoral inquiry carried out by the Commission into the retail banking sector in 2005, consumer immobility emerged as one of the elements behind low competition among banks. Customers tend to stick to the same bank even if its costs become higher than competitors (see EURACTIV 01/02/07).

In its report, Parliament acknowledges that “the lack of consumer mobility is often dictated by the long term relationship of trust” between banks and customers, but at the same time underlines the existence of bureaucratic and economic barriers which prevent the switch.

Paying to close a bank account is one of the costs the Parliament wants to reduce, if not abolish. In addition, the report pushes for fewer bundled products, as these make it more complicated to change account and also increase costs for citizens.

“Everybody has to be able to choose to access a single service or a whole packet,” Pittella told EURACTIV. In other words, like the low-cost airline Ryanair allows customers to buy flights separately from insurance, food or baggage handling fees, so should banks allow customers to buy what they want rather than packets filled with products they do not require.

Pittella also advocates a balanced approach to the complex issue of Multilateral Interchange Fees (MIFs), which payment card issuers charge to retailers. While MasterCard and Visa face possible Commission fines for their anticompetitive MIFs, Competition Commissioner Neelie Kroes does not foresee straightforward abolition of the fees as retailers are demanding. Pittella wants the Commission “to further analyse the sector”.

The report, which has been widely approved by the Parliament Committee for Economic Affairs, will be voted upon today in plenary, where it is again expected to be endorsed fully. 

Meanwhile, the Commission launched a public consultation after its inquiry, and in autumn a White Paper on retail banking is expected.

To read the interview in full, please click here.

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