More transparency

More competition in the market, and a pricing structure that's more transparent – they are the recommendations of the Independent Commission on Banking, as published in their final report.

The ICB found that many customers find it difficult to know which accounts are cost effective because of the complex charging structure of current accounts, especially relating to overdrafts.

The report recommended that a new switcher service should be introduced to allow customers to move accounts more easily, and that there should be a strong new challenger in the market to provide competition. It also suggested that the Financial Conduct Authority should be the ones promoting effective competition.

The ICB said: 'Switching rates are remarkably low, and this is not explained by high levels of customers satisfaction with existing supplier. Indeed there has been strong public dissatisfaction with aspects of bank pricing, such as unarranged overdraft charges and widespread mis-selling in the case of payment protection insurance (PPI).'

A spokesperson for Which? added: 'The Government must move fast to tackle the lack of competition in our banking system. We need a dramatically improved switching process, a regulator which acts to promote competition and a market where banks genuinely have to compete for their customers by offering good value products and better service.

'The Government must be clear how it will create more competition when it sells our stakes in Lloyds, RBS and Northern Rock. It should not hesitate to refer the industry to the Competition Commission if the market does not improve or if Lloyds won't agree to enhance its divestment.'

Andrew Hagger of Moneynet.com commented: 'There is very little competition in this market, particularly for those who don't regularly go overdrawn. Some banks advertise credit interest rate of 5 percent – but this is only paid for one year, and then only on balances up to £2,500.

'In effect people will only gain about £100 in the first year, and higher-rate taxpayers will have even less. Most people don't see this as sufficient reward to go through the hassle of switching account – even if banks have made this process a lot quicker.'

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