Free banking is a 'dangerous myth' as there is nothing free in life, Bank of England Executive Director Andrew Bailey said in a speech in London on Thursday. Free accounts will lead to product mis-selling, he said.
"It means that we pay for our banking services in ways that are hard to link to the costs of the products we receive." This can distort the supply of banking services.
The banks may not properly understand the costs of products and services they supply. According to him, the reform of retail banking cannot move ahead unless the issue of free in-credit banking is tackled.
Moreover, a single bank cannot break out of the existing situation without appearing to raise the price of its service to customers. It is hard for the industry as a whole to break out without appearing to collude, he said.
"So, it may require intervention in the public interest, not least because it is a way to encourage greater competition," Bailey concluded.
by RTT Staff Writer
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