It’s hard to believe that it’s already been three years since the meltdown of our economy and the subsequent bank bail out. Yet today, well over 1000 days later, we still find ourselves in the midst of a crisis that threatens to bankrupt a handful of European countries and dramatically change our economic structure for the foreseeable future.

Japanese consumers took it slow in the 90's, as their economy saw little growth

While the bail out sured up the banking sector and gave investors confidence, it did little to increase consumer confidence or reduce future unemployment rates. But it must be said that we’re not at risk of collapse, we may face a 90′s Japan-esque decade of very low growth, but it’s still growth and there’s very little chance of things going the way of Greece or Italy.

The problem, that’s been well highlighted, is our economy’s dependence on the banking sector instead of more reliable (but less glamorous) industries such as manufacturing and exporting physical goods. The Office of National Statistics (ONS) ‘Blue Book’ reports that the financial sector accounted for 31.9% of Gross Value Added (GVA) to the British economy, yet in size it only makes up 5.1% of it.

The Banking sector is small in size but unmatched in economic contribution

The result is a financial sector that employs few people and produces nothing that can be bought by other countries but contributes massive tax receipts. The major problem is that, unlike Germany who’s Mittelstand makes niche items of a high quality that will always be in demand somewhere in the world, our banking sector can collapse simply due to a lack of confidence.

But, that’s our bed so to speak and unless we have a radical rethink on the structure of our economy; we’ll be sleeping in it for a while yet. So, with the banking sector (and our economy) still in need of protection, David Cameron made a decision on Friday to go against a new EU proposal to place bank charges on financial transactions that could see financial institutions upsticks and leave the City.

Cameron veto'd the FTT in Brussels on Friday

The new Financial Transaction Tax (FTT) would be a tax on every purchase or sale of stocks or bonds or whatever financial product by a bank. Like any tax, if we all pay then it’s fair, but the problem is 75% of the total tax paid through FTT would be paid by banks located in the UK. This would leave banks with no real incentive to base themselves in the City of London and could see them leave, taking huge tax payments with them and damaging our economy.

That’s why Cameron veto’d it, but he’s going to have to explain himself to his right, sorry, left-hand man, Nick Clegg and other MP’s later today, many of whom fundamentally disagree with the veto, fearing it may distance us from Europe. Such an outcome could mean difficulties with trade, relations and important economic ties, which could also spell disaster as Europe is by far our largest trading partner.

Clegg and Cameron don't see eye-to-eye over the EU veto

So, going with the FTT or against it has implications but whether we support it or not the EU can vote in favour of the new charges and force them upon us. It’s difficult to know what will happen with FTT but the bigger question is what will happen to the Euro Zone and the EU as a whole. The fallout from FTT may well shape a new EU and the inability to save Greece, Italy and even Spain could see them leave the single currency, as could their unwillingness to continue with austerity cuts and tax hikes.

While these outcomes are unknown, one thing is for sure – the next five years will see a major shake up of the European Union and the Euro Zone and anyone who tells you they know exactly what’s going to happen is either back from the future or a fool.

Overdraft fees have created a lot of tension and mistrust among banking customers. Fortunately, the Department of Business, Innovation and Skills has announced a decision to make sure policies on overdraft fees are easier for customers to understand. The Department for Business, Innovation and Skills has setup a voluntary agreement with the banks that will help create a fairer system for customers.

The new policies will apply to all current customer accounts. The banks are going to be committed to making these terms clearer and easier to understand for their customers to understand. One of their first initiatives is to increase transparency. In accordance with these agreements, the banks are going to start sending out reports to their customers, informing them of what they are spending on their accounts. All major banks have agreed to release these reports annually.

Additionally, the banks have agreed to help prevent customers from overdrawing their accounts. They will send a warning to customers, notifying them when their account balance is close to zero. This should be enough to give customers a heads up that they will either need to add funds to their account or cut back on their withdrawals.

In the long run, these initiatives should do a lot to help customers keep their accounts within normal limits and reduce the chances of an overdraft. Robert Lloyd, executive director of Which? is optimistic with these initiatives. They are clearly a step in the right direction and should be sufficient to keep customers from paying more exorbitant overdraft fees. However, Lloyd states that customers clearly do not trust banks right now.

One concern raised by Lloyd and his colleagues is the scope to which these new terms apply. Do they only apply to overdraft accounts, or do they apply to all bank accounts? Clearly, these questions need to be answered. Lloyd and the other executives at Which? insist the banks be required to provide more data as to how they use their current bank accounts.

Banks have been charging significant bank fees for several years. Although there have been a number of ways customers can fight to get their money back, these fees have been largely accepted as a fact of life. However, there may be some light at the end of the tunnel yet.

Customers were starting to believe that bank fees couldn’t possibly get any better. They peaked at 25 pounds for a single overdraft. Just when things seemed like they couldn’t get any better, the decision of a long-standing legal battle was finally made.

Customers took these banks to court, arguing that the banks resorted to unfair trading practices. The Office of Fair Trade took an interest in the number of customers that were making these allegations. The Office of Fair Trade decided to issue a legal settlement against the banks, forcing them to change their policies on overdraft protections.

The courts sided with the OFT. Unfortunately, the victory was short-lived. The banks appealed the decision, and high courts ruled that the OFT did not have legal grounds to assess these cases. The lower court’s decision was thrown out and the OFT and disgruntled customers were back to square one.

Financial Secretary to the Treasury, Mark Hoban wants to look out for the interests of consumers. He said that customers came to the watchdog agencies, insisting that the charges were unfair. They felt the banks often left their terms ambiguous and demanded clearer terms.

Ministers are willing to stand by voluntary measures to change the practices. The other solution requires changing the law itself, which the banks would fight and any decision would be appealed. Although this seems to be the path of least resistance, many people criticize the government’s attitude towards the situation. Critics insist that relying on banks to make voluntary changes to their policies on overdraft fees will create the change they are looking for.

Bank charges have actually dropped significantly in the past few months, when they topped 40 pounds for a single overdrawn transaction. Although this shows some improvement, customers feel their is still a long ways to go. Interest rates are now nearly one third of the principal on overdraft balances. As a result, the public’s confidence in banks is seriously dwindling.

Fortunately, arrangements are being coordinated with the British Bankers Association to improve the system. Customers are being given more control over their accounts and should be able to substantially reduce their balances in the near future.