The Bank of England’s executive director and future boss of the PRA Andrew Bailey has suggested that free banking (when in credit) has led to distortions in banking and even encouraged misselling. The Money Debate is not so sure. We wouldn’t put it above reason five or six at most when it comes to PPI and it has very little to do with missales of funds either. Clearly there are some issues where products are not priced exactly at what they cost and indeed many banks themselves are almost resentful at the fact that they can’t charge for bank account services directly because the market, consumer groups, politicians etc. won’t le them. I can see how it sets up a situation where banks therefore look for something else to make a turn from. However it strikes me as more than a hop, a skip and a jump to move from that to loss leading on loan rates and making a huge margin on insurance. That required an ‘eyes wide open’ approach to massive levels of charging and a lack of systems to ensure some level of appropriateness from the sale. I’m afraid I can see that having happened whatever bank accounts had been charged at. I think the demand for super-profits, the easy money pre-crash and the woeful lack of internal and external oversight would have ensured almost all of the problems we have seen anyway.
P.S. And I wonder if the embryonic Financial Conduct Authority agrees with the embryonic PRA?