On 22 October 2020, the Antimonopoly Committee of Ukraine (“AMC”) published the results of its market study of the banking services market. It contains a number of proposals to eliminate certain competition restraints for ensuring the growth of competition in the relevant market.
Over the last 5 years, the AMC has received complaints about:
- impossibility to choose a bank for certain services based on competition advantages (e.g., price and quality of services, etc.)
- restrictions for private banks to service individual accounts
- exclusive rights of state-owned banks to service a certain category of clients
The AMC has identified various entry barriers for access to 17 segments of the banking services market. For example, only state-owned banks can service bank accounts for pension payments to military retirees and bank accounts for electricity market participants, etc.
At the same time, there are more than 70 banks operating in the Ukrainian banking services market, which makes it potentially competitive. The existing market barriers have:
- limited private banks’ abilities to provide services
- prevented consumers from choosing a service provider on the “price/quality” basis
The AMC’s market study also referred to the EU best practices demonstrating that states may intervene in the development of the banking services, if:
- the provision of such services in the free market is inefficient
- this can stimulate the development of those areas, where there is insufficient competition among private banks
Given the current level of concentration in certain segments of the banking services market, the AMC believes that there is a need to create conditions for the development of competition between state-owned and private banks based on their competitive achievements. One of the key tools in achieving this goal is the creation of equal and transparent conditions for business activities.
Therefore, the existing entry barriers should be:
- critically analysed in terms of the feasibility of their existence and opportunities for their diminishment
- revised, taking into account the presence of a significant number of potential market participants, their stability, systemic importance, etc.
To prevent infringements of the competitive neutrality principle in regulating the banking services market, the AMC has approved the results of its market study of the banking services market and will send proposals to the Cabinet of Ministers of Ukraine on the reduction and elimination of restraints for the growth of competition in certain segments of the banking services market, in particular:
- to verify expediency and other grounds for the maintenance of restraints
- to cancel exclusive rights of state-owned banks to services provided in “no risk sectors”
- to create competition mechanisms for the selection of banks, which will be applicable in “high risk sectors”
