Liberal Democrat Treasury spokeswoman Baroness Susan Kramer has told banks to forget about an end to free banking until they have restored public trust.
Speaking at a Social Market Foundation fringe event on competition in banking at the Lib Dem conference in Brighton last night, Kramer admitted there is a legitimate argument to charge for current accounts to prevent misselling.
In August, new Barclays chairman Sir David Walker said free banking was the cause of misselling scandals at banks in the past decade. Bank of England executive director Andrew Bailey said free banking is a “dangerous myth” and must be changed.
Last night, Kramer said: “There is an argument to be had about whether customers pay for individual accounts and services instead of it being packaged up in extraordinary ways meaning people who do not need many services are being subsidised by those who do.
“But the banks have to recognise it cannot happen until trust is restored. The banking industry needs to take restoring trust on board in the way it behaves on a daily basis. There has to be a rethink of banking culture and a focus back on customers’ needs and service rather than viewing the customer as a potential market to sell to. An awful lot has to happen before an end to free banking.”
Kramer is a member of the Parliamentary Commission on Banking Standards which is set to provide the Government with recommendations for its banking reform bill by 18 December. It will begin scrutinising the draft banking reform bill from 8 October.
Kramer criticised current banking reforms as “backward-looking” and questioned whether they will be fit for purpose in 10 years time.
She said: “The whole way we are approaching banking reforms is backward-looking. We are all scarred by 2008 and everything that has happened since, such as PPI misselling. Underneath it we are in a dynamic period and I expect banks in 10 years time to be fundamentally different than today. I hope we can reshape the regulator and banking culture so it is fit for purpose after a period of dynamic change and not just to deal with the grievances of the past.”