Commentators and consumers alike are glad the Norwegian Competition Authority has launched an “analysis” of competition among Norwegian banks that can lead to a full-scale investigation. It’s especially timely, given all the concern over interest rates on both home loans and savings accounts.
“Analyzing” competition among the banks is what the authority itself calls “the first step” towards a full investigation into the banking market in Norway. The market is dominated by the country’s biggest and highly profitable bank, DNB, in which the state still owns a major stake after bailing out the former Bergen- and DNC banks and forming DNB as a result of a national bank crisis in the early 1990s.
Since then the banking market has been further consolidated, with competition coming largely from lots of small local banks around the country. Most, though, have seemed to follow DNB’s lead on quickly setting up lending rates when the central bank’s policy rate rises, but being slower to raise rates on savings. Fees on bank services are also much higher than in many other countries. In the US, for example, credit cards issued by banks can not only be free of annual fees but also reward customers in various ways when they’re used.
The competition authority has stressed how banking services, especially the terms attached to loans and savings accounts, “have great importance for Norwegian households’ economy.” It added that “better competition can yield lower mortgage rates, higher deposit rates and lower fees.” Even small interest rate differences “can amount to thousands of kroner a year for individual households,” the authority wrote. “That’s why it’s important to have good competition among the banks.”
Carsten Henrik Pihl of the homeowners’ organization Huseierne was jubilant after the authority’s announcement, noting how it suggests that competition among Norwegian banks is not good enough. “Norwegian households deserve a thorough analysis of this,” Pihl told business news service E24, not least because families in Norway spend an avergage of around NOK 130,000 on interest payments but rarely move their banking business elsewhere.
That’s something the authority is also examining, noting how “customer mobility” within the Norwegian banking sector is low. Line Djupvik Andersen, project leader at the competition authority (Konkurranserilsynet), expressed concern over “various hindrances” also for new banks to establish themselves in Norway, or expand.
“There are also conditions in the market that can allow the banks to coordinate interest rate levels,” Andersen stated. The collective concerns have made the regulators worry “that competition among the banks has not been good enough,” Andersen said. “Now we will conduct new examinations to see how the competitive situation is today.”
A total of 14 banks have been asked to supply information requested by the authority. After that’s examined, the authority will decide whether a full market investigation will be carried out, and can order measures to improve it if deemed necessary.
Business newspaper Dagens Næringsliv (DN), which has criticized competition within the banking sector for years, editorialized that “there should be enough” for the authorities to act upon. DN has chronicled and complained over Norwegian banks’ eagerness to raise rates on loans for years, and their hesitance to raise rates on deposits.
Norwegian bank customers, meanwhile, are often reluctant to move from one bank to another, because of the complications involved, and DNB was harshly criticized when it acquired a lower-cost online banking service only to eventually shut it down.
“There’s reason to shout a careful ‘hurrah’ that the market for bank services … will finally go under the microscope,” DN editorialized, noting that new authority director Mads Magnussen, who took over his position earlier this year, “is off to a good start.”
NewsinEnglish.no/Nina Berglund
