The new proposals regarding banking will see the banks being forced to separate their high street banking from their investment banking operations, this is try to protect them from any crises in the future. There are some arguments saying that once these measures are implemented the lending to both personal customers and businesses will improve, but some of the main banks are disputing this.
The report states that the measures have to be in place by 2019 at the latest, and Chancellor George Osborne has welcomed the proposals. The aim of the new proposals is to increase both the transparency and the competition in the sector involving personal current accounts where, at present, the 4 largest banks have a 77% stranglehold. It’s believed that the competition is suffering due to the difficulties involved in switching.
The report is therefore recommending that this process be made much simpler for consumers with the introduction of the free ‘current account redirection service’. This will include having a time limit of 7 days for a transfer to be completed by and that all payments and direct debits will be redirected automatically to the new account.
The report has therefore recommended making it simpler for consumers to switch bank accounts by introducing a free current account redirection service. This would include setting a time limit of seven working days for transferring an account and making sure that all direct debits and payments are automatically redirected to the customer’s new account.
The head of banking for Moneysupermarket.com, Kevin Mountford, has said that after the financial meltdown, the way that the industry has consolidated greatly reduced the options available for UK customers, so any measures that encouraged consumers to switch their current accounts quickly and easily were very welcome.
The report does not include, however, something that has been bandied around for quite a while, and that is the introduction of portable account numbers, which allows a customer to keep the same details should they change banks, just as you do with mobile phone providers. This option has been ruled out for the time being due to the costs, but it may reappear again sometime in the future.
The major question being asked is if there will be any downsides or penalties for bank customers. One possibility is that customers may start to be charged to use their basic current account services, so the bank can give their now segregated retail banking arm a boost. The numbers of free current accounts are already declining rapidly, any many analysts feel they will soon only be available to tempt new customers.
Current accounts classed as Premier accounts from Lloyds TSB and Barclays currently cost £300, and USwitch believe that this report will boost this trend and banks will be focussing more on their high end customers. While this might be good news for the wealthiest customers with these premier accounts, it doesn’t look as if the ordinary man on the street is going to be smiling when he finds himself paying for a basic service that has always been free.