Santander, owner of Abbey, has launched a bank account that does not impose any fees – even if the holder exceeds their overdraft limit – in advance of a major court decision into the fairness of penalty charges.
The account, which will only be offered to customers that have a mortgage with the bank, also does away with another common charge – the fee usually levied on customers when they withdraw money overseas.
Santander, which also owns Bradford & Bingley’s savings arm and Alliance & Leicester, said that while it had a strong deposit base and mortgage book it wanted to grow its share of other products including current accounts, credit cards and insurance.
The launch of the account coincides with a long-awaited High Court judgement on the fairness of the high penalty fees that banks have been charging customers who exceed their overdraft limit or have payments rejected. The Court is next Wednesday set to make a decision on whether the Office of Fair Trading can look into these fees, which can be as high as £35.
Banks have come under considerable pressure to reduce penalty fees and, even if the Court was to rule in their favour, it is unlikely that such high charges will survive. Analysts have warned that banks may have to start charging monthly fees for their accounts as they look to claw back lost revenue.
António Horta-Osório, chief executive of Santander UK, said the bank was able to offer the new account as it has an efficient cost base that means it can pass savings onto customers.
“We have become the most efficient bank in the UK and so can offer more value to our customers,” he said.
Santander is aiming to strip £180m of costs out of the business by 2011 by integrating B&B and A&L.
Mr Horta-Osório noted that out of the bank’s 2m mortgage customers only 250,000 of them also had a Santander bank account. “We want our customers to bank with us more,” he said.
Analysts said the launch should help revive competition in a current account market that is hugely dominated by Lloyds Banking Group and Royal Bank of Scotland.
“It is great to see innovation in the banking market, which has been somewhat devoid of new ideas whilst the case regarding unfair charges has been hanging over the industry,” said Kevin Mountford, head of banking at Moneysupermarket.com, the rate comparison service.
Santander is in the process of bringing all three of its brands under the Santander name. The fee free account will be made available in January when the Abbey and Bradford & Bingley branches are rebranded.
