Overdrafts More Expensive Than Payday Loans

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Overdrafts More Expensive Than Payday Loans

Britain's markets watchdog said on Wednesday it may buttress steps from competition regulators to cut very high fees on unauthorised bank overdrafts.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), told MPs he would look at overdraft fees after scrutinising final recommendations from a retail banking review by the Competition and Markets Authority (CMA).

Initial recommendations have proposed that each bank sets its own fee cap on unauthorised overdrafts.

Some MPs want tougher action, saying overdraft fees were now higher than charges on payday loans, which have been capped by the regulator.

Bailey said the FCA has powers to go further than the CMA if it found that consumers were being harmed. "Do we implement their recommendations or do we bring some other things to play?" Bailey told parliament's Treasury Select Committee.

The former Bank of England deputy governor took up the reins on July 1, replacing Martin Wheatley who was ousted by the government for being hardline in the treatment of banks, and for presiding over a bungled insurance sector announcement.

Restoring morale will be one of Bailey's challenges.

"There is a very committed staff that wants to do the right thing. I am very encouraged. It's an organisation that has taken a battering," Bailey said, admitting that even his wife had qualms about him taking the job.

The Complaints Commissioner for the FCA said this week that a rising workload and high staff turnover has increased the watchdog's "defensiveness in the face of criticism".

Bailey, who previously headed the Bank of England's banking supervision arm, said the turnover rate at the FCA has fallen to 11.5 percent from 14 percent, but needed to fall further.

After Britain voted in June to leave the European Union, he said the country's ability to advance its regulatory agenda in Europe where financial rules are made has "diminished materially".

Britain will remain a member of the bloc and its regulatory bodies for at least another two years.

"As long as the UK remains a member of EU we have a duty to apply the rules and we will do that. We are cooperative. We have no wish to disrupt these organisations and we wish to be good citizens," Bailey said.

While it was unclear what access Britain's financial services sector would have in future to the EU market, Bailey said would sketch out to MPs what an "optimal" deal would look like.

He said the FCA was having to work hard to reassure unsettled staff from EU countries as their future status was unclear.

 

(Reporting by Huw Jones; editing by David Clarke)