Of Special Interest
Filters
- Newslink Trends-The Global Strategic Perspective
- Juniper Research says digital wallet users to exceed 4.4 billion by 2025, as mobile drives digital payments’ revolution
- Criminals exploit COVID-19 pandemic with rise in scams targeting victims online
- Equifax says Open Banking proving pivotal to pandemic lending
- Consumer confidence in banks, credit card providers and investments remain stable as demand supercharges digital finance says Toluna research
- Mintos says Europeans are starting to embrace investing
- US banks see IT modernisation as a way to improve customer experience
- Risk mitigation in global trade depends on digitisation-Andrew Raymond, CEO, Bolero International comments
- Juniper Research new study says the volume of B2B payments facilitated by non-banks will exceed 53 billion in 2022, from a COVID-related low of 38 billion in 2020
- CMA issues fifth publication over 3 years of the service quality league table of personal and business current account providers
- Barclays says scammers take advantage of COVID-19, cashing in on nations’ uncertainty
- S&P Global report says financial market infrastructure sector's earnings likely to cool off In second half
- Global banking market capitalisation slumps by over 30% amid pandemic says Buyshares research
- Digital wallet spend in Europe & North America to increase by 40% in 2019, finds study
- Juniper forecasts mobile money transactions will exceed 200 billion by 2024
- Banks can save the world from climate change, says former UN climate chief
- Research by NatWest reveals gender divide over attitudes to saving
- Europe’s big bank problem: too much capital is trapped in the US, says Scope
- Later-Life lending market set to almost double in the next 10 years, finds report
- Barclays/Cebr report challenges nation to think differently about wealth
- Fifth of UK investors looking to debt investment, new research reveals
- Regtech will play a more important role in PSD2, says Mitek
- Banks turn to Fintech partnerships to improve customer experience, finds Fraedom
- New industry code to tackle fraud must deliver, says Which?
- New TTF report highlights loss of trust in financial services
- Arxan highlights financial app vulnerability epidemic
- SAS asks whether banks really need to choose between operations and innovation
- Which? raises alarm as almost 1,700 free ATMs become fee-charging
- Financial wellness affects half of peoples’ mental or physical health, finds report
- Study finds traditional financial institutions embrace Fintech disruption
- Grass is greener for environmentally friendly businesses, finds Barclays
- Prospective homeowners would consider a 40-year mortgage to escape renting, finds Santander
- Millennials’ needs are changing the face of banking industry, says new report
- FS is putting consumer data at risk by failing to protect mobile apps, says Arxan
- A lack of belief in their ability holds 28% women back in work, says Cambridge & Counties
- ‘Which?’ reveals Scotland has lost over a third of its bank branches in eight years
- Next downturn unlikely to be as bad as 2008, according to S&P
- FCA reveals findings from first cryptoassets consumer research
- US consumers favour single mobile app for banking and payments
- Banks suffering major IT shutdowns every day, ‘Which?’ reveals
- The US will be a key offshore centre in 2019, says GlobalData
- Debit industry changes markedly in 10 years of the Debit Issuer Study
- UK's ‘Big Five’ face ‘too big to compete’ as small challengers secure stellar returns
- Banks as vulnerable now as before crash, says new study
- Leverage ratio a constant conundrum for European and US banks, says SNL
25th May 2012
New UK regulator suggests ending 'free' banking
Opinion
Andrew Bailey, the chosen head of the new UK banking regulator, the Prudential Regulation Authority has started a major controversy. He launched an attack on 'free' current (Check) accounts arguing that the need for banks to make up for the cost of running these accounts creates instability and potentially risk taking. He made reference to the Payment Protection Insurance mis-selling as an example. Bailey believes'free banking' leads to lack of clarity on cost amongst consumers also. A third argument is that the cost may fall unfairly on certain groups, such as for unauthorised overdrafts. Accepting that one bank could not start charging in isolation he suggested that perhaps the move to charging for the account should be forced by government.
The first problem with this viewpoint many have pointed out is that current accounts are not free, the bank gains interest income from the account balances and through charge for overdrafts, foreign transactions etc.
It is curious that Bailey should think that tariff's involving interest payment and a range of charges for different payment and credit types should add to clarity, and somehow be comparable between banks. It would in fact be likely that banks would deliberately seek to make the tariffs difficult to compare in the way telecom companies do. He also does not appear to take into account the cost to the banks in applying such charges. This cost does not arise from the calculation of the bills, which is done by computer and would just mean longer and more complicated statements. It would arise instead from the massive increase in customer service personnel needed to handle the questions and disputes. Another criticism was why Bailey should think that gaining more income from current accounts would lead to banks charging less on other products or selling them less hard.
An interesting exercise would be to determine how many of those bank accounts which have been charged for unauthorised overdrafts have the characteristics of relatively high transaction volumes and a low average balance throughout the month. If there was such a correlation then this group would be no better of under Bailey's charging scheme.
Bailey admits to obsessing on the subject, saying on a radio program that he was "like a dog with a bone". His suggestion of forcibly ending free banking because of this obsession seems totally inappropriate and must raises concerns as to how he will lead the new regulatory body. Hopefully the politicians, who should set policy not the regulator, will see that forcing such a change on an unwilling banking customers would not be a vote-winning idea.