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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.

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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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