Free banking can end, says the City watchdog
BANKS were yesterday given a green light to start charging customers for having a current account.
THE country’s financial regulator said it would ‘not stand in the way’ of such a move – which could spell the end of decades of free banking.
The intervention infuriated consumer groups, who pointed out that banks are continuing to axe branches and cut levels of service.
The chief executive of the Financial Conduct Authority told a conference of senior bankers that ‘other countries have different fee-based approaches’.
Nikhil Rathi said: ‘We have always been clear that if business models need to change in response to competition and a changing market, we would not stand in the way. For example, the “free if in credit” banking model in the UK is a market and commercial decision, not a regulatory requirement.’
At present, UK banks offer a current account with no monthly fee. They make money from account holders in other ways, such as fees for being overdrawn.
Customers who opt for a premium account are charged, but these accounts tend to offer perks such as travel insurance.
Mr Rathi confirmed that major banks would remain obliged to offer a free, basic account. But these are often poorly advertised because they do not make money for the industry.
However, popular current accounts could begin to charge. In the US, fees can range from £5 a month to £20. Former pensions minister Baroness Ros Altmann said the message sent out by the FCA was ‘seriously troubling’. She said: ‘On one hand it says it wants to support consumers, while on the other it is showing a green flag to banks… to rake in extra cash from already poorly served customers.’
Derek French, founder of the Campaign for Community Banking Services and a former retail banking chief, says: ‘The idea of scrapping free banking is outrageous. The public would not stand for it.’
Dennis Reed of Silver Voices, a campaign group that represents the elderly, said fees would punish those who don’t go overdrawn.
A spokesman for the banking trade body UK Finance said: ‘There is a wide range of accounts available, some of which come with a fee, as is more common in other countries.’