Banks 'Should Charge For Current Accounts'
High street banks will need to start charging for current accounts to prevent mis-selling scandals, a senior policymaker has advised.
Andrew Bailey, the executive director of the Bank of England and whose signature appears on bank notes from his time as chief cashier, described free banking as a "dangerous myth" which encourages banks to increase fees for other services.
There are 120 million current and savings accounts at UK banks, the majority of which do not have a charge unless overdrawn unlike bank accounts in many other parts of the world.
Dr Bailey said this free banking makes it hard, for both customers and banks, to link costs to products and services received and that it may have spurred the mis-selling of products like payment protection insurance.
The nation's four largest banks Barclays, Lloyds, Royal Bank of Scotland and HSBC are paying a large part of around £9bn in compensation for mis-selling the loan insurance.
"In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying," he said in a speech to the Westminster Business Forum.
But regulatory intervention may be the only way forward, he added.
"It is hard for a single bank to break out of the existing situation without appearing to raise the price of its service to customers.
"And, it is hard for the industry as a whole to break out without appearing to collude. So, it may require intervention in the public interest, not least because it is a way to encourage greater competition."
The comments received a mixed reaction from consumer groups.
Mike O'Connor from Consumer Focus said: "There would be real value in establishing a more open and honest relationship between banks and their customers on what they get, how much it costs and whether others are offering better value for money.
"What mustn't happen is that consumers end up with the worst of both worlds - paying for accounts but still enduring unfair charges, opaque and complex products, mis-selling and poor customer service."
Meanwhile, Dr Bailey, who is due to become second-in-command at the Prudential Regulatory Authority when it replaces the Financial Services Authority as regulator, also suggested the UK base interest rate would remain at 0.5% for the foreseeable future and that domestic banks were prepared for Greece leaving the euro.
what do you think?
This fool at the Bank of England has a very short memory. Interest started to be paid on current accounts when interest rates were much higher and the banks were profting from sitting on their customers' money. An interim stage was 'free banking if the account is in credit.'
sounds like another excuse to make more money from banking customers.the bankings fees will still be there that will never change.if a bank charged me for acurrant account i would look elsewhere but that would be impossible if they all charged.just another rip off charge from the banks.no surprise there
sounds like the banks have lost out to the tune of 9 billion excluding all the other debts and losses we the taxpayer had the bail out costing billions.they want to start to look at there pathetic business management before they start ripping us off even more.the reason most the banks needed bailouts bad management and stupid reckless lending and the same with ppi insurance.there fault again.its always there fault and they dont care because we the taxpayer will bail them out everytime.sounds like another rip off way to boost bank profits.greed and bad management causes this problem and it will only get worse.banks are a complete joke
They already charge for current accounts by not giiving you any interest (or lower interest) on the money in there, by charging for overdrafts, by charging for letters etc, etc. Anybody who wants to pay more go right ahead but include me out.
OK fellow - give us a "real" interest rate on the credit in our current accounts, money which you are using for your own purposes, and then we can think about paying for our accounts.
John, if you look around and are prepared to move your account, you CAN get a 'real' rate of interest on a current account. Considering 3% is a pretty good rate right now, 2% on a current account is pretty good! (Im not going to advertise them by naming the bank thats offering that rate - they can pay for their own advertising, but its easy to find on the net)
If everyone demanded cash in the pay packets as it used to be then who would care what the banks would charge
Slight problem buying anything over the internet or by cheque, or using standing orders though.
They should be very grateful anybody ever bothers leaving their money with them, whatsoever. Without us, they'd all be what? ...
Does anyone else remember the campaign to force all employers to transfer our wages directly into our bank accounts? They promised we would not be charged to get our own money out on demand and argued the case for enforced banking by saying how much money it would save both the banks and industry by not having to use specialist security firms to physically transfer huge amounts of cash as well as the safety issues from armed payroll gangs. Seems like Mr Bailey is simply trying to increase bank profits by going back on their word. So who is making interest from our wages when in the bank accounts? Time I think to demand our wages in cash and bypass the banks completely!
And current account customers should charge banks for all the money they lost!
In their haste to make as much money as possible the banks employed spivs using spiv tactics. Now it's all backfired they are having to pay this money back and would seek to get this money from elsewhere. Should my bank start charging me for using my own money they will find themselves losing a customer of 45 years standing along with the the other services for which I do pay.
I agree with Roger, go back to being payed in CASH and see if the banks can beg for our money as well as we do? Just think of all the jobs that will re-create ha ha ha
So in our current account we no longer get interest so the banks can use it to give loans and charge about 10%. If we have to pay them to have a current account then they could lose all their customers because the Bank of England want banks to earn billions more so they can then give out higher bonuses. The Bank of England is stupid.
In the rest of Europe if you want a bog standard Current Account with a cheque book and debit card you have to pay..... say Euro 10 or something like, per month for this facility. Whereas in the UK this basic account is FREE (as long as you comply with the T&C's) I accept all the arguements put forward here but that's not part of what this news item is about!!!