In addition to these three sets of products, the sector inquiry has also taken some account of other products for SMEs such as leasing (which involves a bank’s paying for part or all of the cost of a capital asset for an SME and the bank then leases this asset to the SME). Together with the retail banking products specified above, the sector inquiry also analyses payments systems, since they form the core of money transmission services in personal and SME banking, and are significant structures within the retail banking sector as a whole.
General characteristics of retail banking markets : The supply side of retail banking markets shows common features that are typical for banking markets in general. The main difference between retail banking and other banking fields is the fragmented demand side of the first, comprising individual consumers and small enterprises. In the following, the characteristics of the supply and demand sides of the market will thus be discussed separately. The demand-side of retail banking markets is, as would be expected, fragmented. Bank customers are often faced with information asymmetry, i.e. lack of full information about the products and services on offer and hence cannot make meaningful comparisons. Moreover, there are numerous barriers to customer mobility (e.g. tying and bundling of products, switching costs such as closure charges, etc.) that result in a certain reluctance to switch suppliers, hence making price competition less efficient.
Regulation of retail banking : Across the EEA, competition authorities are increasingly turning their attention to banking markets. Competition authorities in both Iceland and Norway have dealt with several cases involving retail banking markets over the years.14 It is by now firmly established that EEA competition law applies to the banking sector. One tool of prudential regulation is entry regulation by means of bank license requirements. This is explainable by the rules on own funds adequacy. However, the promotion of stability and the avoidance of a systemic crisis cannot justify all occurring entry restrictions. Such 27