Free banking is a 'dangerous myth'


The idea that banking is free is a "dangerous myth," according to Andrew Bailey, who is set to become the chief regulator of the financial services industry.

"It is a myth because nothing in life is free," says Bailey in a statement. Customers may think their bank account is free, but in actual fact they are paying through hidden costs such as the extremely low interest rate many banks offer on their current accounts.

Bailey is currently an executive director at the Bank of England but in July he will take up the position of chief regulator of the Bank's new Prudential Regulation Authority. Some experts believe his attack on free banking is a sign that, once he's started his new role, Bailey will launch a full investigation.


This disconnect between the products banking customers have and the costs associated with them caused by a belief in free banking is causing too much confusion for both customers and the banks themselves, says Bailey.

"I worry that the banks may not properly understand the costs of products and services they supply. And I worry also that this unclear picture may have encouraged the mis-selling of products that is now causing so much trouble," he adds.

"In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying."

Your Comments

 In other words they want to bring back bank charges.
I wish I could master their double speak and duplicity capabilities.
But I would be somewhat too ashamed to use them.
No-charge banking suits me fine.

This is defined by the Americans as "regulatory capture" when discreet but intense lobbying pressurises the regulator to increase charges/costs to the public disadvantage.
Any member of the public who thinks that by introducing charges to bank accounts the large banks will stop pushing unsuitable but very profitable products to their more foolish customers must be living in a dream world.

Is this the signal for another round of "compensation for the stupid"?  "Please sir, I didn't realise that bank buildings and bank staff have to be paid for.  You are giving me some money because I didn't do my homework about Payment Protection.  Can I now have some more money because I was only paid 0.0001% APR on the amount I forgot I had in the bank?  Please sir, what does APR mean?"