Ex-exchange chairman joins calls for end to free banking

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The Independent Online

A former chairman of the London Stock Exchange who authored an influential report on business banking for the Blair government has joined the growing chorus of voices calling for an end to free banking.

Speaking to the Parliamentary Inquiry into Banking Standards, Don Cruickshank said free banking relied on subsidies from those who do not keep their accounts in credit.

He said this distorted the banking market and made it uncompetitive. Its end, he said, "would be good for the economy and almost all consumers".

Mr Cruickshank also said it would be easier for the one million or so people who don't have a bank account to get one.

"A competitive market cannot sustain cross subsidies from one market to another," he added.

Pat McFadden, a Labour member of the inquiry, pointed out it might be hard for members to recommend an end to a service that most Britons value as a result of the activities of traders who offered "bottles of Bollinger" for fixing Libor.

But Mr Cruickshank said that the inquiry might not have to make such a controversial proposal because the same effect could be achieved by other means. His report into business banking for the Blair government recommended wholesale changes to the market, but was effectively neutered by Gordon Brown. He urged the inquiry not to allow any dilution of the report by Sir John Vickers' Independent Commission which called for retail banking operations to be "ring-fenced" from investment banking.