David Prosser: Free banking may be bad news for customers
Outlook It appears to be "bash a banker" week at the Bank of England. On Tuesday, the Bank's Robert Jenkins accused the industry of "intellectually dishonesty". Yesterday his colleague Andrew Bailey took up the cudgels, describing the way in which the misconception that banking is free has "distorted the landscape" (as the banks subsidise the provision of free current accounts with higher charges elsewhere, and make product decisions accordingly).
Now, one might think that banks would rather like to begin charging for current accounts, or at least for many more of the services they provide via the products (fees for cash withdrawals or direct debits, for example). But they actually prefer the status quo – and not just because they have found ways to cover the cost of what they are unable to charge for.
In fact, what our dominant providers really like about free banking is that it is a serious bar to new competition. Established players have a book of customers mature enough to subsidise their operations – enough people paying unauthorised overdraft fees, say. New entrants must be prepared to face substantial losses for an extendedperiod, particularly if they achieve scale, before they are able to develop that model. Is this why, for example, Tesco Bank still has not launched its long-awaited current account?
Several witnesses made this point to the inquiry into banking conducted by Sir John Vickers, though his final report did not address the problem. Free banking is sacrosanct, it seems, even it isn't really free and even if it stifles the sort of competition that everyone seems to agree is needed.
- 1 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 2 Students offered grants if they tweet pro-Israeli propaganda
- 3 Satellite full of sexually experimental geckos adrift in space, Russia loses control of mission
- 4 Exclusive: Cameron’s Big Society in tatters as charity watchdog launches investigation into claims of Government funding misuse
- 5 Israel has discovered that it's no longer so easy to get away with murder in the age of social media
MH17 crash: Investigators discover more human remains and 'huge section of plane'
Susan Sarandon on David Bowie romance: 'He's worth idolising'
Students offered grants if they tweet pro-Israeli propaganda
A day in the life of Vladimir Putin: The dictator in his labyrinth
Exclusive: Cameron’s Big Society in tatters as charity watchdog launches investigation into claims of Government funding misuse
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
John Barrowman praised for Commonwealth Games opening ceremony gay kiss
iJobs Money & Business
£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...