Public confidence in banks drops

It seems that many of us are keeping hold of £50 notes under mattresses and in home safes because we have lost confidence in banks it emerged yesterday.

The Bank of England said that due to 'quantative easing' the total value of its notes in circulation has soared while the use of high value notes in transactions is falling. The gap is huge - there are 40million more £50 notes in circulation than two years ago but the banks are actually seeing fewer of them back through the system. Pundits say say that this is prima facie evidence of a loss of faith in financial institutions.

I say that given the fact that many savings accounts now only offer less than 1% interest that we lose almost nothing by keeping our cash at home instead of in the bank. Banks have recently threatened to charge as much as £2.50 per cash machine transaction, this will only increase the number of people who wish to keep their money outside the banking system.

This could be the birth of a new trend, With cheques not accepted at so many places and people reluctant to use credit cards now that the laws have changed and the card agreements have 'real teeth' perhaps people will start to see banks as un-necessary luxuries. Maybe the new pattern will be to withdraw all cash not required to cover direct debits at the beginning of the month and spend cash throughout the month, tucking what is left into their piggy banks.

If this happens then the scope for banks to make profit from running current accounts will all but disappear hitting the bankers right where it hurts - in the wallet!