Ringfence could hike bank costs and end free current accounts

 
Tim Wallace
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SPLITTING up retail banks from their investment arms could end up costing consumers dearly, as it would end the subsidies given to current accounts from other parts of banking groups, think tank Policy Exchange warned today.

The ringfence could mean the end of free banking, with customers instead being charged by lenders to use their current accounts, it added.

Ringfencing was proposed in the Vickers Report and backed up by the Parliamentary Commission on Banking Standards, and will be beefed up with the threat to fully split up any bank which tries to undermine the restrictions.

The aim is to stop the culture in the investment banks seeping into retail banks, as well as making sure retail customers are not harmed by investment banking crises.

But the report argues it will be so costly to banks that they will have to find new sources of revenue, such as charging normal customers.

The think tank also wants the ringfence to be made more flexible, arguing it makes it difficult to serve small firms and rich individuals with complex financial needs.