FSA: Banks must end ‘free banking’ myth

Banks must stop cross-subsidising products to claim some of them are free, a Financial Services Authority (FSA) director has said.

Speaking at the Future of Banking conference in London yesterday, Andrew Bailey, director of the UK banks and building societies division at the FSA said "there is no such thing as free banking".

"The pricing of retail banking is a problem," Bailey told delegates.

"The notion of free banking has in my view distorted the landscape. There is of course no such thing as free banking.

"What it really stands for is that charges are levied inconsistently across products supplied by banks, with the consequence that some appear to be free."

Bailey said the idea that some banking products such as current accounts are free is "unhelpful".

He argued for a more transparent system of disclosing the cost of products in banks.

"The philosophy should be: give the public what they want but at a fair price which is transparent to them," he said.

In August, research by the British Population Survey (BPS) claimed half of consumers who bought a regulated product from a bank were unaware of the existence or level of charges they paid for it.

In October, the FSA proposed new rules for the selling of packaged accounts by banks after it discovered hundreds of consumers had been sold products with features unsuitable for them.