End of free bank accounts 'on the horizon'

Free banking could become a thing of the past in the UK, an expert believes.

Free access to bank accounts may be removed from the UK's financial system sooner rather than later following the publication of reform proposals, an expert believes.

The majority of consumers have been able to deal with personal finance options such as their current account or ISA without incurring any fees in the past as banks and building societies have made most of their products charge-free.

However, according to Keith Churchouse, director of Keith Churchouse Financial Planning, this may all be about to change in the near future as financiers react to the Independent Commission on Banking's (ICB) report.

Earlier this week (September 12th), the ICB - a body set up by the government last year and headed by Sir John Vickers - put forward a raft of potential alterations to the country's banking arena that have been accepted be chancellor George Osborne.

These measures have been specifically designed to help prevent issues that arose throughout the global economic downturn from occurring again.

For instance, under the new rules, lenders will have to ringfence their retail operations - and the money of their customers - from any external investment activity in order to disallow the possibility of consumer funds being used for bailouts.

In addition, companies are expected to make it simpler for individuals to switch their bank account and Mr Churchouse feels this could result in them either leaving the UK market or increasing the price of their services.

The expert explained that the cost of this change in regulation is estimated to be around £1 billion, so the "only way" this will be viable for many firms is to "introduce charges".

"I can certainly see the end of free banking coming along very quickly indeed," he added.

Mr Churchouse went on to note that this makes it even more important for people to choose a bank account that is well suited to their needs.

By Joe Letts