BoS account beats strict Bonn rules

THE BANK of Scotland has launched a new cheque account in Germany that gets around the country's strict rules banning money market accounts.

Although marketed in Germany in marks, the account is based in the UK and counts as offshore banking for Germans. The move beats what many bankers see as widespread restrictive practices in European banking markets that undermine the single market in financial services.

Last year Barclays ran into serious problems in France when it launched an interest-paying cheque account that the French authorities claimed broke rules forbidding interest on current accounts. The bank was forced to modify its account substantially.

Many Community members have regulations restricting competition in banking. Money market accounts are against the law in Germany.

The intense competition in new products characteristic of British banking is widely disliked by European banks and supervisors, who regard it as destabilising for the banking system and monetary policy. But there are fears that this will be used as an excuse to protect domestic banks.

The Bank of Scotland account pays interest of about 7 per cent compared with the 2 per cent available on most short-term deposits in Germany, where money has to be locked up for long periods to earn a higher return.