Finansforbundet rejects the criticism in the report on competition for private customers

On Tuesday, the Danish Competition and Consumer Authority’s long-awaited report on ‘Competition in the banking market for private customers’ was published. The conclusion is that the competition for private customers could be better.

But both Finans Danmark and Finansforbundet reject the conclusions in the report.

The report was commissioned by the Danish Minister of Industry, Business and Financial Affairs Simon Kollerup (S), who is critical of the competition situation.

“It’s a very good thing that we have now gained a new status in terms of competition in the banking sector. But I think it is alarming reading. We have a problem when so many Danes cannot see what they are paying to their bank and so few Danes change banks. Because if you don’t know the price, it’s hard to know whether you are better off changing banks”, writes Simon Kollerup in a written response to Finanswatch.

He points out that five per cent of private customers change banks every year and refers to the Danish Competition and Consumer Authority’s experiment where 4 out of 10 banking customers could not find comprehensive information about the price of being a customer.

The Danish Competition and Consumer Authority writes in the report that in general, customers are satisfied with their own choice of bank. Over half would recommend it to others, while only eight per cent would advise against it.

At the same time, the majority of customers – just under 70 per cent – are satisfied or very satisfied with their bank advisor.

High demand for labour

But the report also concludes that there are high salaries in the financial sector and sees this as a sign of a less effective competitive situation.

President of Finansforbundet Kent Petersen flatly rejects this. He believes that the salaries in the financial sector are an expression of the demand for employees with those skills. And he believes that this is an indication of high productivity and sound earnings in the sector.

“It’s nonsense. I don’t understand the argument that high wages are an expression of low competition. Over the past two years, there has been a high demand for labour, which increases the price”, says Kent Petersen to Børsen Pro.

He emphasises that there are periods when rounds of layoffs are lined up.

The Danish Competition and Consumer Authority writes that the calculated salary premiums are in the top ten of 128 different industries in the analysis and are higher than in industries such as insurance, pension, credit associations and financial services.

Conversely, Finans Danmark published a corresponding analysis of the salary level in the financial sector last year.

In comparison with other industries, Finans Danmark generally found that the salary premiums in the banking and mortgage sector were well below the salary premiums in the areas of insurance and pension, pharmaceutical products, aviation etc.

The industry organisation Finans Danmark would like to enter a dialogue to make it easier to find information about costs for customers, although a number of tools have already been developed.

But it strongly rejects the idea that the competitive situation should be seen as ‘alarming’.

“Basically, we don’t recognise the picture they paint of the competitive situation. We believe that Danish banking customers are some of the most mobile in all of Europe. If you look at the prices of home loans, they are probably some of the cheapest you can get in the whole world”, says Ulrik Nødgaard, CEO of Finans Danmark to Børsen.

The former director of the Danish Competition and Consumer Authority Finn Lauritzen also rejects the criticism. In Finanswatch, he says that if you read the report in its entirety, there’s nothing to be learned.

“On the whole, it has to be said that the financial sector is being liberated. There are indicators that point in the direction that the competition could maybe be tougher, but the report does not put forth anything that is really wrong”, says Finn Lauritzen, who emphasises that he is speaking as a senior advisor in the think tank Axcel Future.

The Danish Competition and Consumer Authority itself refers to Finansforbundet’s survey of bank advisors from 2021 in its report.

The survey asks, amongst other things, about the advisors’ experience of the competitive situation. Just under 60 per cent of the advisers assessed that there is fierce competition between the banks. The majority of advisors believed that there is either some competition or fierce competition.

Over 70 per cent of the bank advisors responded that the competition has intensified over the past 3 years.