Advisers have backed calls by Bank of England executive director Andrew Bailey for banks to stop perpetuating the “dangerous myth” that banking services are free.
Speaking at the Westminster Business Forum in London last week, Bailey said promoting banking as free is misleading as customers are paying for banking services “in ways that are hard to link to the costs of the products received”. He warned this can distort the supply of banking services.
Bailey said: “I do not think we will have a retail banking industry that is properly serving the interests of the public until we tackle the dangerous myth of free in-credit banking.
“The dangers include that the pricing of banking to customers varies too much depending on the services they use. I also worry that the banks may not properly understand the costs of products and services they supply and this unclear picture may have encouraged the misselling of products that is now causing so much trouble.”
Barclays, Lloyds, Royal Bank of Scotland and HSBC are paying about £9bn in total compensation for misselling payment protection insurance.
Brunning Newman Houghton director David Brunning says: “Banks have created these problems for themselves through shameless false advertising of free banking. It is time for people to realise that bank accounts are products you pay for and that should be made explicit to people.”
Jacksons Wealth managing director Pete Matthew says: “I think everybody wants transparency and the market is turning against the banks because of the lack of it. The banks need to come out in the true spirit of the RDR and be open about what they are charging.”
Quainton Hills Financial Planning director Gordon Bowden says: “Banks will continue to missell because they will always look to sell the products they think can earn them the most.”
Bailey will become head of the Prudential Business Unit, the part of the FSA now mirroring the future PRA, once Hector Sants leaves his position as chief executive of the regulator next month.