Competition in the banking market

The Competition Authority has today published a discussion paper on competition in the banking market. With this, the Competition Authority wishes to encourage financial institutions and the government to pay attention to competition issues in financial market policymaking and to present its views on bank mergers.

One of the factors that will be decisive in the reconstruction of Icelandic business life is how financial activities will be conducted in this country. Effective competition in the financial market is particularly important for both the business community and consumers. It contributes, among other things, to job creation and the competitiveness of Icelandic companies.

The Competition Authority believes that financial market policy must prevent homogeneity in structure and mindset, and create the conditions for a vibrant market and innovation in the sector. The Competition Authority is wary of larger commercial banks buying or taking over smaller financial firms, and of the creation or strengthening of a cosy market of two or three larger banks that do not face the threat of external competition. Such a market structure is detrimental to the public and the business community.

Discussion document updated 13 September 2009, see the news item below.