Businesses should find it easier to switch bank accounts from the end of June as a result of a new industry code of practice for switching business accounts.
The Irish Bankers Federation (IBF) yesterday announced details of its switching code for business customers, which it has developed in association with the Irish Payment Services Organisation (Ipso).
The code follows the introduction of a similar code for personal customers in February last year. Its extension to business customers was one of the recommendations made by the Competition Authority in its study on banking.
Under the code, which comes into effect on June 30th, financial institutions must provide business customers with a switching pack that explains the process. The new bank must also undertake to have a customer's new account up and running within 10 working days of the bank's approval of the customer's application. The new bank and the old bank must complete the process of switching standing orders and direct debits within seven working days of the new bank receiving an account transfer form signed by the customer.
At the moment, business customers must transfer all standing orders and direct debits themselves. IBF chief executive Pat Farrell said the code would provide a clear and simple road map for business customers who want to switch accounts.
IBF and Ipso developed the code in consultation with the Irish Financial Services Regulatory Authority and business representative groups the Small Firms Association , Chambers Ireland, Irish Small and Medium Enterprises and the Irish Farmers Association.
Switching business accounts is more complex than personal accounts, due to the number of creditors involved so the switch needs to be timed carefully in order to avoid upsetting payroll schedules.
The rate of switching in the business banking market is thought to be very low, however some 30 per cent of the estimated 250,000 businesses in the Republic are already customers of more than one bank.
In its first year, the personal switching code was used by 17,000 consumers, out of a total of 51,000 people switching. This meant 1.5 per cent of consumers with current accounts switched banks last year. The code's introduction sparked greater competition, with smaller players abolishing transaction fees.
"If the business code follows the pattern of the personal code, you would expect to see some developments in the marketplace," Mr Farrell said.
The code was welcomed by Pat Delaney, newly appointed director of business sectors at the Irish Business Employers Confederation, and John Dunne, chief executive of Chambers Ireland.
IBF is examining, in conjunction with the Law Society, the possibility of introducing a standardised mortgage deed to streamline the mortgage switching process.
Mr Farrell said lenders were "committed in principle" to a standardised deed, but no timeline has been set for its implementation.
