RBS 'breaches ruling on small firms accounts'

Royal Bank of Scotland has been accused of being "underhand" and breaching a key ruling by the Competition Commission which was meant to guarantee a fairer deal to millions of small businesses.

Small business organisations reacted with fury as it emerged that RBS, the largest provider of accounts for small businesses, is not going to follow the other Big Four banks by automatically giving them improved banking terms.

Stephen Allambritis, head of parliamentary affairs with the Federation of Small Businesses, said the move by RBS was "underhand" and warned he would raise the issue with the Office of Fair Trading.

The Big Four banks have been forced to offer their small business customers better deals after a stinging ruling by the Competition Commission in March which accused Lloyds TSB, Barclays, Royal Bank of Scotland and HSBC of not giving small business customers a fair deal.

The report, endorsed by the Government, said the Big Four must start paying interest on business current accounts or scrap charges for services such as cheque cashing.

All of the Big Four bar RBS have responded to the report by saying they would automatically either start to pay interest or reduce money transmission charges, a move which will wipe out hundreds of millions of pounds of profit.

RBS, which controls 30 per cent of the small business banking market, has instead written to its 1 million small business customers telling them if they want to start receiving credit on balances, they should respond to the letter or contact their relationship managers.

The bank admitted RBS customers, and those of NatWest which it also owns, will not automatically receive any improvement of their terms.

The Federation of Small Businesses said RBS's decision "does not go along with the spirit of the Competition Commission".

RBS said it complied with the commission's ruling, which requires banks to "offer" improved terms and does not say banks must automatically reduce charges or introduce interest. RBS said it had received approval for its deal with the OFT.