TSB and Virgin Money push for a current account shake-up

Jayne-Anne Gadhia, chief executive of Virgin Money, who wrote to the CMA last week, said: “Free banking distorts the market but it would be a courageous politician who was seen to abolish it.

“Instead the CMA should make banks pay the going rate of interest on current account balances, as we do, which would make more banks think about starting to charge for current accounts.”

TSB’s Pester called for even greater change, saying banks should issue monthly statements telling customers what they have charged for their services.

He said: “The CMA has a golden opportunity to expose UK banking to the full force of competition, putting consumers in control at last.”

He also wants to see the Current Account Switch Service, which was launched in 2013, considerably beefed up.

He said: “So far only 12% of bank customers have heard of it and just 2% have used it. The target was 75% awareness.

“It also doesn’t work for the people who would benefit most from switching, those with overdrafts.

“I want to see a personal credit passport which would allow a customer to approach another bank with their overdraft and get an instant decision on whether they could do a better deal.”

Virgin’s Gadhia has little hope that the Treasury will relent on the 8% tax surcharge on bank profits in the summer Budget being applied to challenger banks.

“It sounds pretty fixed to us and we are budgeting for it,” she said.

Virgin reported a strong third quarter with gross mortgage lending up by 38% to £5.5 billion this year and its mortgage balances up 12% to £24.5 billion.

Gadhia said there had been an uplift in people remortgaging to fix their rates ahead of a rise in base rates.