Banks caught in card service cartel

RIGA - The Latvian Commercial Banks’ Association believes that the Competition Council’s accusation of a cartel agreement among Latvia’s banks, which introduced interbank payments for the maintenance of the bankcard system, is “absurd and unjustified,” reports Nozare.lv. In the association’s opinion, the Competition Council wishes to “punish” the banks for the establishment and development of the bankcard system in Latvia. Furthermore, the Competition Council, it says, has not been able to define clearly which party has inflicted losses, because the commission payments mentioned by the Competition Council’s decision do not infringe on consumer or retail companies’ interests.

The association believes that the Competition Council’s accusation is based on unfounded suppositions, and the Competition Council has overlooked the actual contribution of the interbank payments system to the Latvian economy, namely, the possibility for consumers of one bank to pay for goods and services in a retail outlet where bankcard operations are provided by another bank, without paying an extra commission.

The current system of settlements is transparent and provides all banks with equal competition opportunities; it also allows consumers to use their bankcards in any store, emphasizes the Association of Commercial Banks. The interbank settlements have no effect on cardholders, the association adds.

The association’s president, Teodors Tverijons, believes that accusing the banks’ united interbank commission fee on servicing bankcards of being damaging to the Latvian economy is absurd, because it helped create a convenient bankcard system for the entire country that was in the consumers’ interest. In addition, there was no cartel agreement, as all information on the interbank system of bankcard services is public.

Such a system already exists in the global economy, and the use of bankcards without such a system would have been more complicated and expensive, said Tverijons. Members of the Association of Commercial Banks are now analyzing the Competition Council’s announcement and will “seek justice,” warned Tverijons.
The Competition Council “discovered” a cartel among 22 commercial banks regarding commissions on bankcard and ATM services, and decided to fine these banks 5.5 million lats (7.8 million euros) altogether, announced the Council’s public relations officer Inita Kabanova.

In praising the work of the Council, Finance Minister Andris Vilks (Unity) said that the Competition Council must carry on with its work and carry out similar investigations in other sectors to make certain that there are no other cartel agreements disadvantageous to consumers. Vilks, who worked as chief economist at SEB bank’s Latvian branch before taking the finance minister’s office, stressed, “The banks’ agreement ascertained by the Competition Council was not in the interest of bank customers and the public, and it definitely was damaging to healthy competition.”
Vilks said he was pleased with the Competition Council’s work.

Swedbank was imposed a fine of 2.8 million lats; Citadele bank - 1.2 million lats; SEB bank - 558,744 lats; Latvijas Krajbanka - 259,006 lats; DnB NORD Bank - 167,466 lats; Nordea Bank Finland Plc’s branch in Latvia - 158,401 lats; Rietumu Bank - 103,927 lats; and the following less that 100,000 lats each: GE Money Bank, Latvijas Hipoteku un zemes banka (Latvian Mortgage and Land Bank), Norvik bank, Aizkraukles bank, PrivatBank, UniCredit Bank, Danske Bank’s branch in Latvia, Baltic International Bank, Trasta komercbanka, SMP Bank, Baltikums, Regionala investiciju banka, Latvijas Biznesa bank, LTB Bank and VEF bank.

The illegal agreement was in force from Dec. 1, 2002, until Jan. 7, 2011. Not all banks, however, were parties to the cartel during this entire period.

The Competition Council has determined that the amount of interbank transactions and the commission on bankcard services paid by stores were not economically justified. The commission should have decreased as the amount of bankcard payments and bank income from these payments increased, but this never happened. Due to the cartel agreement, bank commissions on cash withdrawals or account checks via a different bank’s ATMs were also higher than should have been.