The pitfalls of regulating retail banking overdraft charges

Hans Zenger, Dec 10, 2012

In recent years, regulators in the UK, Germany and elsewhere in Europe have increasingly voiced concerns over high borrowing costs on consumer current accounts resulting from overdrafts. Interest rates regularly exceed 10% and are sometimes considerably larger than banks’ costs of funds. The UK Office of Fair Trading (OFT), in particular, has repeatedly argued that competition between retail banks on overdraft interest rates is not effective, especially with regard to unauthorized overdraft charges. Currently, regulatory intervention is considered both in the UK and Germany, with market studies and regulatory initiatives under way.

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The pitfalls of regulating retail banking overdraft charges

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