The man in line to become the chief regulator of the UK's financial services has described free banking as 'a dangerous myth'.
Speaking at a business forum in London, Andrew Bailey said that customers are paying for their banking services in different ways, such as poor rates of return on funds held in current accounts.
Mr Bailey, who is currently an executive director at the Bank of England, and will begin his new job in July, attracted some criticism late last year when he questioned the idea of free banking.
However, he has reiterated his opinion that the way we pay for banking services must be reviewed.
"In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying," said Mr Bailey.
And he warned that the current system has made it difficult for providers to understand how much their services should cost, and may have contributed to the mis-selling of products which 'is now causing so much trouble'.
The UK's banks are currently paying back billions of pounds to customers who were mis-sold payment protection insurance on products such as personal loans and credit cards.
But while calling for change, Mr Bailey admitted that it would be difficult for one bank to take the lead on the matter, as a provider charging for all of its accounts would quite likely lose business.
"And, it is hard for the industry as a whole to break out without appearing to collude," added he added.
To get around the problems, Mr Bailey suggested that intervention from regulators in the 'public interest' may be required, although he acknowledged that public opinion about such a move could well be negative
"But, even if I am like a dog with a bone on this one, I don't think we will have a retail banking industry that is properly serving the interests of the public until we tackle the dangerous myth of free in-credit banking."
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