The notion of free banking is a "myth" that may ultimately encourage the mis-selling of financial products, Bank of England executive director Andrew Bailey has said.
Bailey, the favourite to be named chief executive of the Prudential Regulatory Authority, said too many consumers pay for banking services in a way that is difficult to link back to the products they have been sold.
This can also leave banks unclear as to the costs of their products and services, he said.
"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," Bailey told the Westminster Business Forum.
"[Free banking] is a myth because nothing in life is free; rather, it means that we pay for our banking services in ways that are hard to link to the costs of the products we receive. This can distort the supply of banking services.
"The dangers include that the pricing of banking to consumers varies too much depending on the services they use.
"I also worry that the banks may not properly understand the costs of products and services they supply. And that this unclear picture may have encouraged the mis-selling that is now causing so much trouble."
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