HBOS is to step up its assault

on the current account stronghold of the four big UK high street banks, which hold 72% of the market and have been under fire from the Competition Commission.

More than one million people a year switch their current accounts, helped by a streamlined process ordered by the government, and HBOS claims a 3% rise in market share to 12% in the past two years, which it aims to take to 15%.

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The bank which, as the Halifax, launched the current account war two years ago when it began offering 4% on current account balances, is to increase its rate from 2% to 3% - but only from January 1, 2003. It simultaneously offers an overdraft rate of 8.9%.

The big four pay 0.1% and charge up to 17.9%, though HSBC this month cut its overdraft rate by 3%.

Rival challengers include Abbey National, already paying 3% and charging only 8.7% ,but allowing customers to choose one option not both; Alliance & Leicester paying 3.1% and charging 9 .9%; and Nationwide, which charges 9.9%, last week upped its credit balance rate to a maximum 2.5%.

Shane O'Riordain, spokesman for HBOS, said: ''We do aim to be a member of the big four club, but we have no intention of being a well-behaved member.''

The cost of the exercise will be (pounds) 20m, but the bank is also to enter the market in packaged accounts, where customers normally pay a fee for extra services and which earned the big four profits of (pounds) 500m last year.

HBOS's packaged account will have no fee.

In a third prong of its strategy, HBOS will next year launch an internet-only account which it said would be very competitive, but not a direct rival to its own subsidiary, Intelligent Finance. In the direct market, Abbey National's Cahoot subsidiary has the most aggressive pricing, with a 3.93% rate on credit balances and a 7% overdraft.

HBOS claimed a 25% share of the mainstream current account switching market in the first six months of 2002, and Abbey National said yesterday its share was almost 8%.

A Royal Bank of Scotland spokesman commented: ''In

our experience price is not

high on the list of issues influencing a customer's decision in choosing a bank.'' He said Royal Bank ''continues to make net gains in the current account market''.

The big four have said that an average current account earning 3% on credit balances would only pay out (pounds) 20 a year.

O'Riordain at HBOS said: ''We are taking customers from the big four.''

When they claimed ''net gains'', they must be including new customers and existing customers opening new accounts, he said, adding: ''It is very patronising for banks to suggest that people don't want to be paid a decent rate of interest.''