Measures to make banking easier and fairer to be revealed

The Competition and Markets Authority (CMA) will release its final report into its retail banking market investigation.

It has previously said its proposed remedies could bring benefits to bank customers to the tune of £1bn over five years.

It said bank charges are “complicated and opaque” and many customers see switching banks as “risky”.

Nearly 60 per cent of personal customers have stayed with the same bank for more than 10 years and more than 90 per cent of SMEs get their business loans from the bank where they have their current account.

If personal customers switched to a cheaper deal for their needs, the annual savings could be on average £116 - ranging from £89 on average for customers who do not use an overdraft, to £153 on average for overdraft users.

The watchdog has previously suggested banks should cap customers’ monthly unarranged overdraft costs. It found a wide range of fees, with some charging a daily fee of £5 to £10, some charging monthly fees and some also charging interest.

In 2014, £1.2 billion of banks’ revenues came from unarranged overdrafts - which have been described by commentators as a “cash cow” for banks.

A recent investigation by consumer group Which? found customers slipping into an unarranged overdraft can be charged several times the amount that payday lenders are allowed to charge. But Which? has argued the CMA’s proposals are unlikely to make much of a difference as many banks already put their own caps on charges. The CMA has proposed providers should be allowed to set their own charge cap, which they would have to show clearly, and it said this will encourage banks to compete with each other to drive down the costs.

People may find themselves slipping into an unarranged overdraft when they go over the limit that their bank has pre-arranged with them or when they do not have any pre-arranged overdraft facility. Customers may not even be aware they have gone into an unarranged overdraft - and the CMA wants banks to alert people and give them time to avoid the charges. With the Bank of England base rate cut to 0.25 per cent last week, the cost of borrowing is expected to stay relatively cheap for some time to come. But recent figures from the Insolvency Service showed the number of people going insolvent across England and Wales between April and June jumped by more than one fifth compared with a year earlier.

The CMA has also said new online comparison tools should be developed to help customers compare deals. It has said the prices and availability of loans to small and medium-sized businesses should be more transparent so the majority of SMEs need not turn directly to their existing bank for finance without considering going elsewhere. It has rejected the idea of breaking up the biggest banks and also stopped short of getting rid of “free if in credit” current accounts.

Alasdair Smith, chairman of the retail banking investigation, said previously: “For too long, banks have been able to sit back and not work hard enough for their personal and small business customers.”