Current accounts and other banking services could soon by regulated by the FSA.
The Financial Services Authority (FSA) has proposed a radical overhaul of the way in which the retail banking industry is regulated. In a consultation paper, the City watchdog suggests that its regulatory powers be extended to cover banks' treatment of their customers.
At present, banks regulate themselves through voluntary codes which are monitored by the Banking Code Standards Board (BCSB). But the FSA claims this system is not working to give customers a fair deal because the BCSB does not have the power to fine.
"Retail banking is going through a period of rapid change and regulation needs to keep pace with this change," said Jon Pain, the FSA's managing director of retail markets.
Under the proposals, the FSA would be responsible for regulating all aspects of banks' relationships with their customers, including the provision of key services such current accounts, overdrafts and debit cards. Loans and credit cards would remain under the regulatory control of the Office of Fair Trading.
The consumer group Which? has welcomed the proposals, insisting they represent a chance for the FSA to rebuild consumer trust in the banking sector. However, it warned that a new regulatory regime must be "fair and robust" to ensure clarity in relation to consumer rights.
