No wonder that the banks have fallen back on the oldest money-maker of them all: squeezing the customers — charging them more for lending money to them. In the distant days before free banking was invented, a first-class private customer might expect to pay 2 per cent over Bank Rate, and for a feckless borrower, the margin might expand to 5 per cent, by way of warning. No such luck today. The rates that the lenders are happy to advertise tell their own story, and if you are unwise enough to borrow on your credit card, or careless enough to overdraw beyond your limit, you will soon find yourself in the grasp of compound interest and struggling to escape.
It has been left to Andrew Bailey to observe that all this makes no sense. He speaks for himself, but he speaks with authority — as an executive director of the Bank of England, who in his previous job as chief cashier had to cope with Northern Rock and still find time to sign the banknotes. He knows what can go wrong with high street banking, and he can see what is wrong with it now.Nothing in life is free, he says, banking included. To call it free is to sever the link between costing and pricing. It makes for a false market, it misleads both the banks and their customers, and it opens the door to mis-selling. We need a far better sense of what we are paying and how we pay for it, and we shall never get there while the illusion persists.
Some regulator might, one day, call the shots, and so claim to promote competition. Certainly the high street could do with more of it. Which high street bank, like a latter-day Midland, will choose to tell its customers that the age of free banking is over, and offer them a better deal? This selling point might come more easily from a new entrant to the market — the Bank of Marks & Spencer, say, with its plans for 50 in-store branches, and (surely) its own ideas about value and pricing. That would make the planners at Bigfours sit up, and might take their minds off their coffee-shop model.
Somewhere in the depths of their head office or at a pensioners' party, they must be able to find an old hand who can remember how CHRGS worked. Quite well, in their way, and better than giveaway coffee and overpriced napkins.
