FINANCE – BANKING. Regulators Press Banks for Transaction, Service Fees

08 Jun 2011 • by Natalie Aster

“The Baltic market is relatively young and as the market evolves it is natural that a higher number of competition law-related issues are discussed.” Tony Kylberg of SEB

After first enjoying a boom period of fast credit growth and sweet profits, then swallowing their share of sharp criticism for reckless lending and facing the consequences in the form of huge losses, commercial banks in the Baltics have finally become the target of regulatory effort.

First this March came a EUR 8m fine in Latvia for 22 local banks for fixing fees for personal customers' cash-point use and retailers' bankcard transactions. Then Estonia's competition watchdog urged the country's banks to act faster to cut card transaction commissions (when the card and the POS terminal are serviced by different banks).

Finally, the pressure wave has reached Lithuania. In his first official meeting with the members of the Lithuanian banking association LBA, Vitas Vasiliauskas, the new chairman of the board of the country's central bank Lietuvos bankas, draw the bankers' immediate attention to the need of lowering fees for socially sensitive services (payment of housing bills, fines, etc). "The methodology and ideology for pricing such fees must be thought over and altered," he was cited in a statement.

On the face of it, it looks like a region-wide pressure on banks to cut their appetite after irresponsible lending that helped to build housing price bubbles in each country. Yet in Latvia and Estonia the regulators seem to be more concerned about the national banking systems' impact on local businesses (and indirectly on consumer prices) while in Lithuania the central bank appears to be instructing the banks about 'right' and 'wrong' service price levels.

"The Baltic market is relatively young and as the market evolves it is natural that a higher number of competition law-related issues are discussed by the market participants and the competition authorities, in order to establish good market practice," comments Tony Kylberg, head of legal affairs at SEB's Baltic division, to news2biz.

"When there is a lack of precedents and if the parties disagree, it is also natural that some issues are tried by courts. But there is no reason to believe that the activities we see now are directly related to the economic crisis."

Swedbank: not a regional trend

Jan-Olof Brunila, deputy director of Swedbank Group Cards division, argues that activity of the regulatory authorities is in general more active in the new EU member states.

"The EU Commission and the national competition authorities have been looking into bank fees for some years for regulatory reasons especially to check that such fees are managed according to the EU competition legislation. This process started already in the retail bank sector study conducted by the EU Commission in 2006 and has concerned every member state. Therefore we do not see this as a regional trend," Brunila says.

"We can, however, see that regulatory authorities have been more active in the new EU member states than in the original EU 15. For instance, regulatory cases also exist in Hungary, Poland, Romania and Bulgaria regarding bank fees compliance with competition law."

"Swedbank has appealed the decision by the Latvian competition council to court of law since we are of the opinion that there has been no breach of the competition law in the Latvian card fees case. On the contrary, we are of the opinion that the Latvian card payments fee structure has been beneficial to consumers and merchants and society as a whole."

SEB and Swedbank are among the banks fined in Latvia and among those in Lithuania that raised service rates.