Sajedah Karim, UK FS Partner, EY said: “FCA’s announcement confirms banks will have to fundamentally reassess their pricing structures and considerably increase clarity on the cost of overdrafts. This will cost the banking industry. The FCA’s figures show it expects a 96% fall in the charges applied to typical unauthorised borrowing of £100 (from £5 to less than 20p). This will clearly impact the £2.4bn in revenue that banks receive from arranged and unarranged overdraft fees and charges. Lowering rates whilst continuing to make existing current account propositions viable will be a difficult balancing act for banks. Notably, the FCA makes no new comment on the future of free banking.”
The decision has been received with some sort of resignation by most banks, which in 2017, made more than £2.4billion from overdrafts, though they have started to implement the changes required by the FCA. Given the magnitude of the decision, moving the implementation date from December to April 2020 will be a welcome window in which firms can refine their overall propositions.
Sajedah Karim, UK FS Partner, EY said: “FCA’s announcement confirms banks will have to fundamentally reassess their pricing structures and considerably increase clarity on the cost of overdrafts. This will cost the banking industry. The FCA’s figures show it expects a 96% fall in the charges applied to typical unauthorised borrowing of £100 (from £5 to less than 20p). This will clearly impact the £2.4bn in revenue that banks receive from arranged and unarranged overdraft fees and charges. Lowering rates whilst continuing to make existing current account propositions viable will be a difficult balancing act for banks. Notably, the FCA makes no new comment on the future of free banking.”
The decision has been received with some sort of resignation by most banks, which in 2017, made more than £2.4billion from overdrafts, though they have started to implement the changes required by the FCA. Given the magnitude of the decision, moving the implementation date from December to April 2020 will be a welcome window in which firms can refine their overall propositions.