With news that Barclays Bank alone will be writing down their asset base by approaching £1 billion – with many expecting the final figure to be above this – many are starting to ask who will pay for this financial mess.  Will the Banks take it on the chin, or will they look for compensation from the consumer?

As you guessed, it will no doubt be the consumer who will pay the price in the end, with Banks arguing that the consumers benefitted when their balance sheets were strong (with better lending terms, etc) and now they will need to pay the price.  While the recent write-off by Barclays, and the others expected to be announced from other UK Banks, will not have a long term impact on the financial strength of these institutions, it has affected confidence in the system on the short term.  This will be the reason the Banks use to increase your charges, notch up your loan interest rates and generally squeeze you for a little extra.

Lets not forget that the UK Banks are also in the middle of a messy court case with regard to overdraft charges and the question of there legality.  They have already shelled out some £570 million in compensation, with potentially billions more at risk if they lose the test case in January 2008.  The Banks have traditionally come down in favour of their shareholders in such situations, looking to replace the lost funds by hitting their customers.  We have seen masses of Bank branches closed down, many systems now automated and a general reduction in free face to face advice.  The consumer is already paying the price for increased competition and risk in the sector.

The bottom line is that even though the main UK Banks have substantial asset bases, and will be relatively untouched by recent events in the long term, they have shareholders to keep happy.  Slowly but surely “free” banking will disappear (if it has not already!), charges will creep up and many more new fees will be introduced.  The next few years will show the value of shopping around for the best deal, with many expecting a general hike in the cost of personal and business banking – you have been warned!