Stop offering consumers free current accounts, says BoE exec

There’s an old chestnut that says there’s no such thing as a free lunch, but if the Bank of England’s executive director has his way, there won’t be any fee-free current accounts on offer to customers in the future either.

The myth of free banking needs to be put to rest, says Andrew Bailey, as it leads to a distortion of banking services supply and only acts as an encouragement for banks to charge fees in other areas of their business to make up any shortfalls.  The executive director said, in a speech he gave to the Westminster Business Forum, that the retail banking industry will simply not serve the best interests of the public until the free current account is dismantled completely and done away with.

Mr Bailey, who showed much more candor than his colleagues on the Bank’s Monetary Policy Committee who have kept the base interest rate at 0.5 per cent for more than three years straight,  said he has serious concerns that retail banks have little idea as to what it costs to provide free current accounts to customers, adding that this could lead to more mis-selling incidents in the future, such as the recent payment protection insurance debacle.  This isn’t the first time the executive director has taken issue with free banking, as he raised the issue initially in November of 2011 at a retail banking conference.

It goes without saying that Mr Bailey’s ideas would prove incredibly unpopular with the millions of Brits who currently enjoy free banking, provided their balances don’t drop below zero.

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