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Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), has sparked a backlash from consumers after indicating that the regulator would not intervene if banks opted to charge for current accounts.
Rathi’s comments at a bankers’ conference, where he stated that the FCA would not obstruct changes to business models in response to competition and market shifts, drew sharp criticism from consumer groups. Simon Youel from Positive Money expressed deep concern, particularly given banks’ already substantial profits. He emphasized that any move to end free current accounts would further disadvantage the public, especially amid branch closures.
Former pensions minister Baroness Altmann also voiced apprehension over the FCA’s stance, questioning its commitment to consumer support while seemingly endorsing banks’ pursuit of additional revenue from already poorly served customers.
Although banks traditionally offer current accounts for free while charging for overdrafts, there have been past attempts to introduce fees for current accounts. However, such efforts faced strong resistance from consumers. While regulators have long contended that “free banking” is a misnomer, citing low or nonexistent interest rates on balances, some banks have explored charging for current accounts, like Santander’s 123 account, which imposed a monthly fee but offered perks such as higher interest rates and cashback.
Governor of the Bank of England, Andrew Bailey, has previously criticized the concept of free banking, warning that it incentivizes banks to seek profits through the mis-selling of products like payment protection insurance. Nevertheless, attempts by banks to introduce fees for previously free services, such as cash machine withdrawals, have often been met with public outrage.
Rathi clarified that the “free-if-in-credit” banking model in the UK is a market decision rather than a regulatory requirement, and he signalled that the FCA would not impede moves to end free banking, drawing attention to other countries where banks routinely charge fees for similar services.
