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Reforms could spell end of free bank accounts

Rules designed to protect consumers' money and making it easier to switch accounts could be the 'end of banking as we know it', with charges introduced for keeping a bank account.

The new reforms, published in the Independent Comission on Banking report, are to be implemented in 2019, and will ensure that accounts are transferred in seven working days. Another recommendation was for banks to publish annually a statement that details the amount of interest that a customer has missed out on by having a current account.

But Kevin Mountford, head of banking at Moneysupermarket.com, warns that the changes could come at a price.

'The main concern of these recommendations is the additional costs on the banking sector, which could be passed on to customers in some shape or form,' said Mountford. 'Ringfencing could create an uneven playing field, because all the profits and risk generally come from the investment side, and some banks are better at it than others. Anything can happen between now and the proposals being implemented: who knows what will happen to the credit ratings of those who do not perform well.

'Banks are businesses with shareholders, and they need to make a profit. They are facing pressure from all angles – with falling credit ratings making it more difficult to borrow, they have to pay more to attract custom; they need to hold more funds to satisfy a tighter regulatory framework; then there's the cost of PPI too. The one way they can make money back is through charging for personal and small business customers. It could mean the end of free banking as we know it.'

He added: 'We will see more banks offering premium, free services to certain customers, such as Lloyds Banking Group and HSBC have introduced recently, but if you don't fit that profile you will pay. If you don't use certain products in the way they are designed for that account, you will pay or be shown the door.'

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