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No such thing as free banking, says FCA chief

FCA chief executive Andrew Bailey has said “free” banking services such as current accounts do not exist because they are subsidised by other services.

In a speech at a British Bankers’ Association conference today, Bailey took stock of the retail banking market since the financial crisis, saying it was “hard to escape the issue” of free-if-in-credit banking when looking at banks’ business models today.

Bailey said that “closing” free services as many predict was a misnomer because some clients would already be paying more to fund free services from other products.

He said: “I do not advocate ending free-if-in-credit banking. Why?  Because there is no such thing to start with, so it cannot be abolished as such. Nothing in life is free – sorry to disappoint.

“Some of you may be saying ‘what is he on about?’ Of course, banking isn’t free. So, free-if-in-credit means that costs are recovered and charges levied on some products and services more than others.  And, this means some customers pay more or less than others depending on what mix of products they use.”

Bailey noted that on current accounts, for example, a lower interest paid out to users is a cost, so they are not free.

He added that the “imbalance of returns” across products could have been what drove the creation of higher return products like payment protection insurance.



FCA consumer credit review sorely needed: Robert Sinclair

Affordability standards required of mortgage lenders are not being applied to personal and car loans, PCP and credit cards Following various high-profile warnings over rising consumer debt, the FCA says it will review the sector. This covers credit cards, personal and unsecured loans, and car finance. Latest figures from the Bank of England show that, […]

FCA chairman to step down

FCA chairman John Griffith-Jones is to step down from his role at the regulator next year. In a joint statement published yesterday, the FCA and the Treasury say Griffith-Jones will leave the FCA on 31 March, the end of his five-year term. He will also step down from his role as chairman of the Payment […]


FCA review of broker/lender relationships necessary: Smee

The director general of the Council of Mortgage Lenders believes the relationship between brokers and lenders should be examined as part of the FCA’s study on competition in the mortgage market. Paul Smee, who will step down from the body once the CML is merged into UK Finance this summer, tells Mortgage Strategy that questions will continue […]


Case study: administration — implementing a management log

Our client is a leading video game and publishing company best known for its console role-playing game franchises. The client provides a number of benefits, at varying levels and cost that attract a P11d liability. With the absence of a management log to track data for benefit movements, enormous administrative and therefore cost implications were occurring each year just to comply with P11d reporting requirements.

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Guide: how to… communicate with your pension members

Effective communication of your pension scheme is a large part of getting auto-enrolment right. Delivering the same message to all employees is not necessarily the way to go. To assist you with the communication of your pension scheme, we have provided some key areas to think about, such as:

  • What to consider when segmenting your workforce
  • How to communicate to pension scheme members at the right time in their member lifecycle
  • What topics you should be discussing with your pension members
  • The new pension freedoms and the importance of communicating them


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