Treasury To Unveil 'Landmark' Bank Agreement

By Mark Kleinman, City Editor

Ministers will next week hail a "landmark" deal with Britain's nine biggest lenders to offer millions of consumers a new fee-free basic bank account.

Sky News has learnt that the Treasury will announce on Monday that the banks will establish accounts which end charges - whcih can be as high as £35 per item - for failed direct debit or standing order payments.

The new product will be provided by institutions which between them have more than 90% of the current account market, and will be available to people who are not eligible for a bank's standard current account and either have no bank account, or cannot use their existing accounts because of financial problems.

The participating lenders - which have agreed to launch the accounts by the end of next year - are Barclays, the Co-operative Bank, HSBC, Lloyds Banking Group, National Australia Bank (which owns the Clydesdale and Yorkshire), Nationwide, Royal Bank of Scotland, Santander UK and TSB.

Andrea Leadsom, the economic secretary to the Treasury, is expected to hail the development as a "landmark" agreement, saying that it should bring to an end the problem of consumers being locked out of their accounts when payments fail.

Sky News had previously revealed that some banks had expressed concerns during negotiations with the Government about the terms of the deal.

The provision of basic bank accounts, of which there are estimated to be more than 9m in the UK, is estimated to cost the industry more than £300m annually, with the new accounts likely to add substantially to that bill.

Earlier this year, a European Union Directive ordered member states to supervise the introduction of basic accounts which must charge fees described as "fair".

Ministers are understood to be pleased that they have secured an agreement to launch accounts with no fees, with customers offered services on the same terms as other personal current accounts provided by each participating lender.

This will involve customers having access to all standard over-the-counter services in bank and Post Office branches, as well as access to the entire national ATM network.

Some bank executives have warned that the structure agreed with the Treasury will mean that the new accounts are ultimately subsidised by consumers elsewhere in the banking system.

A further concern was raised that the new account could attract demand from large numbers of consumers who are not benefit claimants, but this is likely to have been alleviated by the eligibility restrictions agreed between the lenders and the Treasury.

The Government estimates that up to 7m people will participate in the Universal Credit welfare programme by 2019, with the new basic account expected to be restricted to that population.

The British Bankers' Association (BBA) has been leading the negotiations with the Treasury about the framework of the plans.

Neither the BBA nor the Treasury would comment on Friday.

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