By Claire West

The Treasury Committee report into Competition and Choice in Retail Banking also looked at lending to Small and Medium Size Enterprises (SME’s).

The Report notes that the debate on SME banking has too often only been focused on the availability and cost of credit. Good customer service for SMEs can be as, or even more, important to SMEs. Competition and the ability to switch is the most important spur to better service.

There are still very high levels of market concentration for SME banking, even though the sale of some of the RBS branches to Santander means the 'Big 4' in the SME sector could in future become the 'Big 5'.

The importance of branches to many SME customers presents a significant barrier to new entrants and therefore to competition.

The Report recommends that the Independent Commission on Banking considers solutions such as an improved Inter Bank Agency Agreement and neutral shared branches as part of its remit to promote competition.