LONDON (Reuters) - Free banking services in Britain for customers who are in credit should remain and authorities should not impose charges as part of attempts to shake up the market, the boss of Lloyds said on Wednesday.
Some politicians, regulators and bankers have called for an end to no fees banking so banks don’t squeeze customers elsewhere. They say ending it would make charges more transparent and improve competition and levels of service.
“Free in credit banking is evidence of competition and customers love it, so I do not intend to change it,” said Antonio Horta-Osorio, chief executive of Lloyds Banking Group, the biggest retail bank in Britain.
“Price regulation is the worst possible thing to do in any sector,” he said at the FT Banking Summit.
“Even if you imposed a price, what would stop people, through competition, driving the cost down to zero again,” he said, adding that market conditions meant the “right price” would also constantly change.
Andrew Bailey, head of the Bank of England’s Prudential Regulation Authority, has called free banking a “dangerous myth” and former top regulator Adair Turner called for it to end. Some senior bankers also want it to end as it can distort pricing, but no leading bank is willing to be the first to withdraw it.
Horta Osorio, whose bank is 25 percent owned by the UK government, also said proposals from ruling Conservative politicians to make it easier to move accounts would be too costly and it would be better to improve an existing customer switching service.
Account portability, which would allow customers to immediately move current account numbers between banks in a similar way to how they now can keep telephone numbers, could cost the industry between 5 billion and 10 billion pounds and take years to implement, he said.
“We have scarce resources and we should use a smaller amount of money perfecting the 7-day switching mechanism, for example in a shorter number of days.”
Under reforms introduced last year, UK customers can now switch their bank accounts within seven days. The time for switching could be reduced to five or three days, Horta Osorio said.
Reporting by Steve Slater; editing by Keith Weir