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LONDON, July 19 (Reuters) - Britain's so-called challengerbanks should be compelled to share the burden of providingloss-making fee-free basic accounts to the financiallyvulnerable, executives from Barclays and Co-OperativeBank said on Tuesday.
The government has been keen to encourage greatercompetition in Britain's banking sector, but the dominantestablished players clearly feel that fledgeling lenders such asAldermore and Metro Bank are gaining an unfairadvantage.
Speaking to the House of Lords committee on financialexclusion, Barclays Managing Director Catherine McGrath andCo-Op Bank's Director of Products Matthew Carter said that theirsmaller rivals are cherry-picking more lucrative customers.
"The basic bank account is a loss-making product but part ofour investment in society," McGrath said in response to aquestion on whether banks in Britain should all be forced toprovide basic accounts.
Both McGrath and Carter said they would be in favour ofspreading the cost of running such accounts across the bankingindustry.
Neither named rivals benefiting from a more niche focus, butCarter said that newer lenders are specifically targetingaffluent urban customers rather than sharing the responsibiltyfor financial inclusion.
Barclays and Co-Op are among a list of nine lenders that inJanuary launched fee-free basic accounts aimed at helping thosein financial difficulty or who have been unable previously toopen an account.
The nine banks agreeed to provide the accounts in avoluntary undertaking with the Treasury.
The government should also close a loophole that could allowEU nationals in Britain to open the fee-free basic accountsregardless of their financial circumstances, Barclays' McGrathsaid.
"It's not right that somebody from outside the UK could beoffered an account with a different price structure to someonein it," said McGrath, adding that the basic accounts should beprovided only to those in genuine financial need of the fee-freeservices.
(Reporting By Lawrence White; Editing by David Goodman)
