Measures to enhance competition in general banking services for individuals and small businesses – Based on a settlement with Íslandsbanki.

Decision no. 25/2017 of the Competition Authority, published today, details a settlement the authority has reached with Íslandsbanki concerning measures to strengthen competition in general commercial banking services. The Competition Authority had previously finalised similar agreements with Landsbankinn and Arion Banki. The measures provided for in the agreement with Íslandsbanki are, as with the agreements with those banks, primarily aimed at: 

1. Reducing the cost to customers when switching banks.

2. Promote more effective competition from individuals and small businesses with those providing commercial banking services in Iceland.

3. Working against circumstances that could undermine tacit coordination in the market/markets for business banking services. 

The measures that Íslandsbanki is undertaking under the settlement are in all material respects similar to the measures provided for in the settlement of the Competition Authority with Landsbankinn.

Under the agreement, Íslandsbanki specifically commits to following the following conditions in its operations:

1.  No arrangement fees will be charged on overpayments by borrowers on any new or outstanding variable-rate loans for individuals and small businesses, regardless of the legislation under which the relevant loans were originally granted.
2.  Caps are introduced on fees for the transfer of tied personal pension savings from the bank to other providers offering personal pension management. This is primarily intended to reduce the lock-in effect of such fees on customer mobility, thereby promoting more effective competitive pressure in this area.
3. The assumption of a mortgage in a property transaction will not be conditional on the buyer moving their banking business to the bank. By 'banking business', we mean a current account and, where applicable, other concurrent business.
4. It will be made easier for customers to move their banking between banks. The selection, development and implementation of systems and technical solutions will be aimed at this, and service surveys will be used to identify customer priorities in this regard, to which the bank will respond.
5. Customers will be specifically informed of significant changes to interest rates and the price list before they take place, to give them the opportunity to move their business if they so choose.
6. The bank will arrange for all information on general fees, terms and conditions, which are publicly published on the bank's website, to be accessible via an open API interface (an information technology gateway for customised programming solutions) which third parties (individuals, companies or organisations) could retrieve and use the information to set up a comparison website that could facilitate more effective consumer oversight. This could also present certain business opportunities for companies interested in establishing themselves in the field of financial technology (FinTech) in Iceland.
7. The interest rate review clause in the bank's older mortgage agreements will not be used to increase interest rates because a customer has moved their banking business elsewhere.

In addition to the above conditions, the newly enacted law on consumer mortgages (No. 118/2016) stipulates that banks are prohibited from setting loan fees as a percentage of the loan amount, as has been customary. During the processing of the bill that became the aforementioned law, the Competition Authority advocated for a ban on this practice, as noted in the Authority's opinion to the Economic and Commercial Committee, dated 7 January 2016. The legislature acceded to these requests.

The settlements with Íslandsbanki, Arion Banki and Landsbankinn also provide input into the policymaking currently facing the government and the banks in the financial market, in relation to changes in the banks' ownership and rapid developments in financial services on the international stage.