Overview

This bill aims to increase transparency and customer control over how banks and building societies use customer deposits. It mandates that banks offer customers a choice between two types of deposit accounts: a lending intermediary services account (where the bank can lend the deposited funds) and a custodial deposit account (where the bank cannot lend the funds).

Description

The bill introduces two new types of deposit accounts:

Lending Intermediary Services Accounts

• Customers lend money to the bank, relinquishing title to the funds.
• Banks can lend these funds to third parties.
• Banks must repay funds on demand with agreed interest.
• Deposit insurance does not apply to these accounts.
• Banks must disclose risks associated with lending, including potential default and runs on the bank.

Custodial Deposit Accounts

• Banks act as custodians of the funds; depositors retain ownership.
• Banks cannot lend these funds.
• Funds are available for withdrawal on demand.

The bill also establishes unlimited fines for banks failing to comply with these requirements. The Chancellor of the Exchequer will determine the implementation date and create transitional provisions for existing accounts.

Government Spending

The bill's impact on government spending is not directly addressed in the text. It is likely to involve some administrative costs for regulatory oversight and enforcement, but no specific figures are provided.

Groups Affected

• Banks and Building Societies: Required to offer both account types, potentially incurring administrative costs and potentially impacting profits if lending options are restricted. Face unlimited fines for non-compliance.
• Retail Customers: Offered greater choice and transparency regarding the use of their deposits, increased risk awareness, and potentially different interest rates depending on the account chosen.
• The Bank of England and the Financial Services Authority: Responsible for enforcing the new regulations and imposing penalties.

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