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Bank reforms suggest simplifying account switching

Bank reforms suggest simplifying account switching

Category: Banking

Updated: 13/12/2012
First Published: 12/09/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Bank customers could soon find it far easier to switch bank accounts as part of the proposals if proposals put forward to reform the UK's banking system get the go-ahead.

Improving the account switching process is just one of the plans suggested by the Independent Commission on Banking.

The commission was set up to investigate how to avoid another banking crisis similar to that seen in 2008 when the Government bailed out several major high street banks.

The resultant report, which has been led by Sir John Vickers, suggests that a free current account redirection service should be set up by September 2013.

Under the new system, all credits and debits going to a customer's old account, including automated payments on debit cards and direct debits, would be caught and automatically transferred to the new account.

In another change that could directly affect consumers, the commission also recommends that in the event of a bank's collapse, making sure depositors are compensated should take precedence over satisfying the claims of other unsecured debtors.

The main thrust of the proposals , however, concentrate on forcing banks to ring-fence their riskier investment banking operations from their retail banking arms.

If the reforms are eventually implemented, the different divisions will have to have separate boards with 'minimal cross-over' between them.

Suggesting the change should be put in place by the start of 2019, the ICB said the move would "make it easier and less costly to resolve banks that get into trouble".

Which? chief executive, Peter Vicary–Smith, welcomed the proposals, saying consumers could not afford to bail out the banks again and do not trust bankers to change their behaviour.

"A clear, high and strong ring-fence will allow failing banks to go bust without taking our deposits and the rest of the economy with them," he said, before adding that the Government must move fast to tackle the lack of competition in the banking system.

"We need a dramatically improved switching process, a regulator which acts to promote competition and a market where banks genuinely have to compete for their customers by offering good value products and better service."

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