Professor Philip Lane:

As Mr. Sheridan indicated, a lot of documentation will be looked at as part of any enforcement action. Any indication of anything that would be either a violation of our codes or of competition law will be flagged. Until these examinations are concluded, I am not going to rule out the hypothesis of collusion. As I said here in December, there is an economic imperative for many of these banks. What I think happened much of the time was essentially that during a period of financial distress in the economy, the banks were trying to save money by charging customers where they could at a higher, more expensive rate. They might say that it was within the terms of the contract, that they interpret the contract to mean they could do that. There is a common economic incentive to do that. It would be ideal if the ethical standards and the culture within those firms would be that they would not exploit it because they were consumer-focused bank and that is what we want to get to.

Our codes have a degree of prescription in how banks are supposed to treat their customers, unlike many jurisdictions which take the view that a customer has been given a contract and caveat emptor. We have a lot more consumer protection in how we approach things but we still had this massive failure. It is an uphill struggle. Let us see what comes out of the examination and associated investigations. Collusion is not impossible but I can think of other reasons it happened.