Banks warned of tougher regulation

24 April 2009 01:31pm

The City watchdog has announced it will regulate the way banks treat their customers from November this year.

The current voluntary Banking Codes will be replaced by a series of rules set out by the Financial Services Authority to ensure that customers are treated fairly.

The changes, which will apply to all banks, building societies and credit unions, will include measures to make it easier for people to switch accounts between different providers, while they will also be given more notice of interest-rate changes.

The move also means that the FSA will have the power to fine firms that fail to live up to the standards it sets out.

Jon Pain, FSA retail managing director, said: "These are important new standards that firms will need to meet. They will affect consumers' everyday interaction with banks.

"Before the new rules come into force, the FSA will publish comprehensive information for consumers detailing their rights and outlining what they can expect from their banking provider."

The change is being introduced due to the European Payment Services Directive (PSD), which also comes into force in November.

Under the directive, the FSA will take over responsibility for regulating most payment transactions, such as paying money into a current account, but the directive does not cover all accounts, such as notice ones.

The new regime will give the FSA jurisdiction over areas that are not covered by the directive.

Once the new regime comes into force, banks will have to provide customers with a "prompt and efficient" service to help them switch accounts between providers.

© The Press Association