Competition and choice in the banking sector

Written evidence submitted by eB ay

In November, eBay submitted a dossier of evidence to the Independent Banking Commission exposing the difficulties that Britain’s small businesses are experiencing in securing access to finance. I am writing to ask you to take this evidence into consideration during the Treasury Select Committee’s inquiry into competition and choice in the banking sector.

In a special report of eBay’s Online Business Index, our regular barometer of the attitudes and performance of online firms, we investigated the relationship between SMEs and high street banks , naming and shaming the banks which were holding back finance. The report found that:

· A third (33%) of small businesses say they are unable to access new finance.

· A third (33%) say they are forced to rely on expensive overdraft facilities in order to borrow.

· Three fifths (60%) believe that banks are to blame for the difficulties experienced by SMEs in accessing finance.

· Half (48%) believe that greater competition in the banking sector is more important than maximising returns from the sale of public shareholdings in the banks.

Our report shows that access to finance remains an acute problem for a significant number of SMEs. Many SMEs believe that inadequate competition and choice in banking is making the problem worse.

In light of this evidence, we urge the committee to consider remedies which would address this problem – for example, by making the promotion of greater competition in the banking sector the Government’s primary objective when drawing up proposals for the sale of public shareholdings in Britain’s leading banks. We also urge the committee to examine ways of encouraging new entrants to the banking market in order to provide small businesses with a greater choice of banking services.

A copy of eBay’s evidence to the Independent Banking Commission is attached [not printed] . I hope you will give this full consideration.

Clare Gilmartin, eBay’s Vice President for European Marketplaces

January 2011