The business organisation ISME has said that lack of competition in banking is costing small firms millions of euro per annum.
A study on competition in business banking, commissioned by ISME, identified high interest rates as well as high costs associated with changing banks, as key factors affecting businesses in Ireland.
The report found that Irish businesses are being charged the highest interest rates in Europe, and that Irish banks are the most profitable in Europe.
ISME says Irish banks are charging its members an average of 8.9% interest for businesss loans. This compares with rates as low as 4 to 6% in the rest of Europe.
They also accuse banks of consistently failing to pass on the full benefit of recent wholesale interest rate reductions to the enterprise sector.
The report finds that the banks have been steadily increasing the profit margin they make from small and medium sized businesses.
The two large banks they say serve 77% of the business sector and, according to the Compecon report, are amongst the most profitable banks in Europe.
It also highlights high costs faced when businesses want to move their custom from one bank to another
ISME wants an in-depth review of business banking to be carried out by the Competition Authority to examine collusion, anti competitive practices, and the high business interest rates its says are charged.
The Irish Bankers' Federation has rejected the ISME report saying it was seriously misleading in a number of key respects.
The federation pointed out that the report relies of statistics from the European statistical agency, Eurostat, despite a warning from Eurostat that their figures cannot be used for international comparison purposes because the interest rates are not harmonised.
