French banks must soon start supplying a monthly statement of charges to their customers and adopt a uniform terminology, but will it result in cheaper services?

According to Christine Lagarde, the French Finance Minister, the aim of the reforms is to ‘stop abuses and the excesses of bank charges.'

No express regulation to impose these changes is to be issued, and the lack of legislation on the issue has angered consumer groups, who argue that previous exhortations to the banks to improve their practices have failed, unless they were anchored in law.

Nevertheless, judging by comments coming from the Fédération bancaire française (FBF) the banks seem prepared to bit the bullet and accept the changes.

Perhaps one of the reasons for their apparent acquiescence is because they are so much on the back foot on a range of other regulatory and tax measures being introduced by the government.

Banking charges account for 40% of the total revenues of French retail banks so the issue is a major one for them.

According to a report in 2009 from the EU Commission, French banks were the third most expensive banks in Europe for the operation of a current account, costing an average of €154 per year, behind Italy (€253) and Spain (€178).

However, a later September 2010 report prepared by management consultants Bain & Co places France as one of the cheaper countries for banking in Europe.

The difference in the two reports is partly explained by the fact that the Bain report reviewed a wider range of services than that undertaken by the EU, notably by including the cost of credit and the level of interest on savings accounts.

Whatever the truth of the matter, the Minister is clearly hoping that greater transparency will allow easier comparison, and introduce more competition between the banks.

The new transparency will take place on a phased basis, with a standardised terminology of at least 10 services in place by January 2011, and adoption of a full common list of main services and their costs by April 2011.

The monthly statement of charges is planned to be in place by next June, although the banks are arguing that their introduction will be an expensive and complex operation that may well take longer.

Since January 2009, the banks have been obliged to supply all their customers with an annual statement of charges.

Others measures to be introduced include a greater level of security on the risk of excessive charges being incurred by clientèles fragiles who are overdrawn. In future there will be a limit to the charges that can be incurred in such cases.

Fixed Fee Accounts

One of the issues that is likely to be well received by the consumer groups is a greater level of clarity on the ‘packages’ offered by the banks, which provide a range of different services for a fixed fee each year.

Critics argue that the nature of the services offered is unclear, as are the terms of their use, and many customers end up paying for services that they rarely use.

It is frequently much cheaper to simply open a basic account, without having any frills attached to it, for the operation of such an account is often free of charge.

However, if you do go this route, you need to carefully read the list of services for which you will need to pay, and their cost. It is sometimes very revealing to find out the lengths to which the banks will go to impose a charge on even the most minor of services!