The Office of Fair Trading (OFT) has launched a far-reaching investigation into the UK banking sector, especially the charges applied to UK current account holders when cheques are bounced or overdrafts breached.

It could possibly lead to recommendations that banks charge their customers a set, regular fee and do way with ‘free’ banking – the business model for retail banking that has been familiar to generations of customers in the UK.

The OFT said that many people have “no idea” of how much they pay for their banking. “We want a greater transparency in what you get and what the charges are,” said a spokesperson. “This will be the most wide-ranging study into personal banking to date.”

The OFT’s chief executive John Fingleton said: “We don’t believe banking is free – people clearly pay for it but customers don’t see how they pay for it.”

A decision was taken by the OFT a week ago to start a formal investigation into the level of charges that banks impose when customers go overdrawn without authority. This was in response to the increasing numbers of people claiming that the charges made on their UK current accounts were illegally high and did not treat them fairly.