Business banking news review: week ending 1 Nov 2012
The Financial Services Authority’s managing director made waves this week after announcing that there’s really no such thing as ‘free’ banking as we know it.
FSA official Martin Weatley, in a statement given to the Parliamentary Commission on Banking Standards, remarked that personal and business bank account providers only offer these so-called ‘fee-free’ current accounts by recovering their operating costs from other sources. This can take the form of quite high overdraft charges sometimes in excess of 20 per cent – which leaves the majority of interest rates charged by credit cards in the dust – and will also collect revenue by applying surcharges for any transaction made outside the UK.
Banks have also been rumoured to lag behind on transferring ISA savings pots as long as possible in order to wring every single last bit of accrued interest before it slips through their fingers. New legislation to curb this activity now require financial service providers to finish such transfers in less than 16 working days, yet many have said that there’s no reason such a transfer should linger more than 48 hours.
Experts say that there’s no reason these hidden charges can’t be made more transparent. This argument is only strengthened by the fact that it’s our taxes that financed the bank bailout, after all, making us all majority stakeholders in several High Street banks.
Mr Wheatley, who will soon be taking on the mantle of the soon-to-be launched Financial Conduct Authority’s chief executive, said that competition within the market needs to increase, and making it easier for new entrants into the retail banking sector will go a long way to resolving the issue. The financial expert said that capital requirement rules need to be more reasonable, in light of a six month long current regulation review into the complexity and cost of authorisation.
Mr Wheatley said that new banking providers say that gaining the right authorisations is often impossible, as the working capital to needed to put the proper systems and staff in place cannot be accessed without first becoming authorised – a rather textbook example of a catch-22 of massive proportions. Instead, the FSA managing director recommended a staged process instead, allowing new entrants to the banking sector a measure of certainty to build capital and recruit high level executives while still requiring the new bank to have everything in place before allowing it to operate fully as a retail provider.