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Bank account switching times to be slashed

Customers will have the right to switch their current account within a week under new plans announced by the Chancellor today.

Bank sign on wall

New government legislation is set to force banks to separate their riskier investment operations from their retail banking activities, while at the same time speeding up the time it takes to switch bank account.

Chancellor George Osborne is also expected to introduce measures to speed up the transfer of funds between accounts held at different banks.

Any bank which fails to comply with the new rules could be forced by the Bank of England to sell off its investment or retail operations.

Banking landscape to change

Mr Osborne is said to be keen to restore faith in the banking industry following a string of recent mis-selling scandals such as PPI (payment protection insurance), where the banks’ bill for compensation and costs has passed £10bn.

Government sources also said it was “inexplicable” that it was possible to transfer large amounts of money between accounts within 24 hours in countries such as South Africa, while in the UK it could take up to three days unless customers were prepared to pay additional fees.

The plans represent good news for consumers fed up with poor customer service and low interest rates, with the time it currently takes to move current account set to be reduced from an average of 10 working days to five.

Changes to UK financial regulation

Later this year, The Financial Services Authority – currently the UK’s only financial services regulator – will be replaced by two separate bodies.

The Prudential Regulation Authority, which is part of the Bank of England, will regulate financial firms, while the Financial Conduct Authority will oversee consumer protection and take responsibility for conduct in retail banking.

There will also be a new governor of the Bank of England in June, with Mark Carney replacing Sir Mervyn King.