Banks to use Libor parliamentary probe to push for end of free accounts

By Gerri Peev

PUBLISHED: 19:59 EST, 19 August 2012 | UPDATED: 01:59 EST, 20 August 2012

Banks are plotting to use a parliamentary inquiry into their bad behaviour as a way of imposing account fees on customers.

MPs and peers on a commission set up to examine the recent  Libor scandal will be approached by financial institutions this week which will argue in favour of introducing current account charges.

Several banks are expected to make the case that ‘free’ accounts were partly to blame for reckless actions by lenders and scandals such as the mis-selling of payment protection insurance.

Banks are expected to argue the case for an end to free bank account, which they partly blame for reckless actions

Santander is believed to be keen to introduce the fees and is expected to make its case to the Parliamentary Commission on Banking Standards on the disadvantages of ‘free’ accounts.

Critics fear the joint commission – set up after Barclays admitted it had attempted to rig Libor lending rates – could now turn into a free-for-all for banks to ram through account fees.

Sir David Walker, Barclays’ new chairman, said the scandals were a ‘consequence of not charging for bank accounts’, and said in principle he agreed with charging fees.

Treasury Select Committee chairman Andrew Tyrie, who is heading the Commission, is a supporter of an end to free banking

Treasury Select Committee chairman Andrew Tyrie, who is heading the Commission, is a supporter of an end to free banking and has described the concept of free accounts as a ‘myth’.

One source close to the Commission said: ‘I am very happy the banks are going to engage on  this issue.

‘Until people fully understand what the banking service they are paying for actually costs we will not have real competition.’

Lord Turner, the chairman of the Financial Services Authority, last month took a swipe at free banking, saying it stifles competition.

‘One important barrier to competitive entry into UK personal-sector banking is obvious – the fact that the core product is usually given away for free, sold at below cost of production,’ he said.

The Bank of England’s executive director, Andrew Bailey,  has also said he favours a bank fee of about £15 per month for current accounts.

But Mike O’Connor, of Consumer Focus, has warned: ‘What must absolutely be avoided is customers facing the worst of both worlds; paying direct fees but still facing indirect costs, poor sales practices and customer service.’

Pentagon to investigate hundreds of suspected child pornography fans in its ranks

Powerful Earthquake Off East Coast Of Russia