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Turner calls for end to free banking – papers

by: IFAonline
  • 24/11/2010
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Turner calls for end to free banking – papers
Free banking for those in credit is expensive to the financial sector, kills competition and stops new providers setting up, Lord Turner told the Treasury Select Committee yesterday.

Opposition to the free banking system, introduced in 1985, has been growing within the sector, with current accounts costing £4.3bn per year to run and banks relying on penalty charges to fund them.

Turner also said there may be a case for breaking up banks into retail and investment arms, and that the liberalization of building societies should be reversed, reports the Telegraph.

He claimed banks use free current accounts to establish relationships with customers, and then sell them inappropriate products, and if banks were able to charge for the accounts, consumers may have more to compare and so encourage competition.

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Fed cuts growth forecast as dollar falters

The US Federal Reserve has cut its growth forecast for 2011 from between 3.5% and 4.2% to between 3% and 3.6%.

Unemployment, the minutes of the Fed’s Open Market Committee reveal, will only fall to between 8.9% and 9.1% from its current rate of 9.6%, a smaller decrease than predicted in June.

The news comes after the Fed decided to inject $600bn (£509bn) into the US economy in another round of quantitative easing, basing its decision on high share prices and a weak dollar, the Telegraph reports.

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Irish banks ‘bleeding money’ says Pimco

Mohamed El-Erian, chief investment officer at Pimco, last night told investors Irish banks are ‘bleeding money’ and advised them to withdraw their funds.

The comments came as Ireland agreed to a loan from the IMF and EU after several days of refusal, adding to market panic over the crisis.

El-Erian said: “Take your money out of an Irish bank and put it in another bank headquartered elsewhere. That is what happened in Argentina and in emerging economies. People worry about their savings.”

Irelands central bank said all deposits are guaranteed by the government, but news that international companies have been withdrawing funds from Ireland has only added to anxiety, the Guardian reports.

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