The end of free banking could be an opportunity for other financial institutions

Building societies and credit unions stand to benefit if we move towards a paid-for model.

While many of us start to recover from the shock revelation that charge-free bank accounts are a myth, and that banks have been incentivised to mis-sell other financial products for their loss-leaders, some financial institutions like building societies and credit unions are quietly looking forward to the end of free banking.

After the scandals that have hit banks over PPI misselling and the £9bn set aside to recompensate those who were its victims, bankers and regulators have shared a rare platform in agreeing that an end to free banking could prevent similar future episodes.

The argument goes that banks were only scheming because fees aren't being levelled towards customers for their accounts, and so inevitably it became necessary to cross-subsidise from one profitable bit of the operation to in-credit personal current accounts free of charge.

Indeed as the newly-appointed chairman of Barclays, Sir David Walker, has said: "Because banks are not charging, it drives them inexorably into this sort of position”.

The issue has been raised in parliament and will be raised again at the Parliamentary Commission on Banking Standards where bankers have already submitted evidence, highlighting free banking as one of the things that led to bad behaviour.

One of the practical problems that awaits this (some call it an inevitability) is if one bank makes the leap and starts charging, the likelihood is that their customers will run and go elsewhere. To be a renegade over this can promise a huge money loss, which undermines the point in doing it in the first place - some risks just don't come naturally to banks.

Of course the other problem is that if it became a trend among banks, nobody can promise against an outbreak in customer dissatisfaction. One of the concerns being raised is that for unethical banking, the general public is being asked to subsidise another income stream for Barclays, HSBC, RBS and Lloyds.

For Phillip Inman, economics correspondant of the Guardian and the Observer, this is like a pickpocket saying he was forced to steal wallets because he was denied other sources of income. The only way of stopping a naughty banker from selling you stuff you don't need, in other words, is by giving him money. One can understand the discontent at this twisted logic.

But from another angle some institutions are seeing an opportunity. While one of the appealing planks of David Cameron's big society was the building up of smaller financial institutions, realists could see the many market entry barriers for types like building socieities and credit unions.

While the mainstream is already occupied by big banks, it was discussed at the KPMG’s 22nd annual Building Societies Database recently that: “almost half of the UK’s 47 financial mutuals had increased their profit in the year to April 2012, and that they would benefit further from the end of free banking.”

This isn't the first time I've heard something similar. Speaking to someone recently who works close to the credit union industry, who preferred to go unidentified, they told me that Barclays' talk of transparent charging structures has made the prospect of credit union modernisation very interesting indeed.

Credit unions have always had such a structure, and if paid-for accounts led to more competition among smaller players then the notion of a credit union membership rise increases the chance of them lending more money, particularly to those who are currently having difficulties remaining creditworthy or are thinking about going to a payday lender.

Trouble is the paid-for model comes with many problems. Too many, perhaps. People don't want to be charged a fee. Customers may end up kicking up a fuss about who their banks lend to on the grounds that their fees subsidise them, which when trying to maintain an image of middle-class respectability, may see the number of creditworthy people diminish.

Though most of us do want more competition and for places like credit unions to have more relevance in the market. Some very complex conversations and arguments are going to be had over this subject, that much is for sure, but it is interesting to note that advocates for an end to free banking are not only the usual suspects alone.

A high street bank. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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I am special and I am worthless: inside the mind of a narcissist

There's been a lot of discussion about narcissists this week. But what does the term actually mean?

Since the rise of Donald Trump, the term “narcissistic” has been cropping up with great regularity in certain sections of the media, including the pages of this journal. I wouldn’t want to comment about an individual I’ve never met, but I thought it would be interesting to look at the troubling psychological health problem of narcissistic personality disorder (NPD).

People with NPD (which is estimated to affect about 1 per cent of the population) have a characteristic set of personality traits. First, they have a deeply held sense of specialness and entitlement. Male NPD sufferers frequently present as highly egotistical, with an unshakeable sense of their superiority and importance; female sufferers commonly present as eternal victims on whom the world repeatedly inflicts terrible injustices. In both cases, the affected person believes he or she is deserving of privileged treatment, and expects it as a right from those around them.

Second, NPD sufferers have little or no capacity for empathy, and usually relate to other people as objects (as opposed to thinking, feeling beings) whose sole function is to meet the narcissist’s need for special treatment and admiration – known as “supply”. In order to recruit supply, NPD sufferers become highly skilled at manipulating people’s perceptions of them, acting out what is called a “false self” – the glittering high achiever, the indefatigable do-gooder, the pitiable victim.

The third characteristic is termed “splitting”, where the world is experienced in terms of two rigid categories – either Good or Bad – with no areas of grey. As long as others are meeting the narcissist’s need for supply, they are Good, and they find themselves idealised and showered with reciprocal positive affirmation – a process called “love-bombing”. However, if someone criticises or questions the narcissist’s false self, that person becomes Bad, and is subjected to implacable hostility.

It is not known for certain what triggers the disorder. There is likely to be a genetic component, but in many cases early life experiences are the primary cause. Narcissism is a natural phase of child development (as the parents of many teenagers will testify) and its persistence as adult NPD frequently reflects chronic trauma during childhood. Paradoxically for a condition that often manifests as apparent egotism, all NPD sufferers have virtually non-existent self-esteem. This may arise from ongoing emotional neglect on the part of parents or caregivers, or from sustained psychological or sexual abuse.

The common factor is a failure in the development of a healthy sense of self-worth. It is likely that narcissism becomes entrenched as a defence against the deep-seated shame associated with these experiences of being unworthy and valueless.

When surrounded by supply, the NPD sufferer can anaesthetise this horrible sense of shame with the waves of positive regard washing over them. Equally, when another person destabilises that supply (by criticising or questioning the narcissist’s false self) this is highly threatening, and the NPD sufferer will go to practically any lengths to prevent a destabiliser adversely influencing other people’s perceptions of the narcissist.

One of the many tragic aspects of NPD is the invariable lack of insight. A narcissist’s experience of the world is essentially: “I am special; some people love me for this, and are Good; some people hate me for it, and are Bad.” If people with NPD do present to health services, it is usually because of the negative impacts Bad people are having on their life, rather than because they are able to recognise that they have a psychological health problem.

Far more commonly, health professionals end up helping those who have had the misfortune to enter into a supply relationship with an NPD sufferer. Narcissism is one of the most frequent factors in intimate partner and child abuse, as well as workplace bullying. The narcissist depends on the positive affirmation of others to neutralise their own sense of unworthiness. They use others to shore themselves up, and lash out at those who threaten this precarious balance. And they leave a trail of damaged people in their wake. 

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times