Free Banking 'A Dangerous Myth'

Andrew Bailey, due to become the chief regulator of the financial services industry, has said that free banking is "a dangerous myth".

Saying that while customers may think their account is free, the true costs are actually hidden.

These hidden costs would include the extremely low interest rate that many banks offer on current accounts.

Mr Bailey is currently an executive director at the Bank of England and will take up his new role in July.

"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," Mr Bailey said in a speech.

He said the situation also made it difficult for banks to understand the cost of the services they provide, which may have contributed to the mis-selling of financial products.

"I worry also that this unclear picture may have encouraged the mis-selling of products that is now causing so much trouble," Mr Bailey said.

However, Mr Bailey says it is a difficult situation for banks because the first one to start charging for accounts could lose significant amounts of business.

(H)