Several of the largest banks, including National Westminster and Barclays, would like to introduce charges. They say the costs of operating the accounts are subsidised by overdrawn customers.
Sir Nicholas said: 'If somebody is providing a service, why shouldn't they charge?' There had been cross-subsidisation for 'years and years' in a number of areas of banking, but this was unlikely to be sustainable.
Rejecting suggestions that the banks might be acting together over charges, he said the Office of Fair Trading was well aware of the degree of competition in banking.
Earlier this month Lloyds Bank said it would not end free banking even if others did. But NatWest and Barclays are weighing up whether to introduce charges.
The BBA also said it was backing in principle a proposal for a central register of bank loans to companies, but had not yet worked out whether such a scheme was feasible.
The register, suggested by foreign banks operating in London, would allow banks to see at a glance a borrower's total debt.
The BBA 'basically liked the idea' but the question was whether a register in an international banking market like London would be reliable.Reuse content