[Gareth]

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HSBC has warned its customers that it is "inevitable" that free banking will come to an end with the introduction of continental-style bank charges.

Earlier this year the Office of Fair Trading (OFT) ordered banks to reduce penalty charges for late payment of credit card bills from £25 to £12, and is now looking at similar measures with overdraft fees.

However, while these measures are good news for consumers, they are anticipated to cost UK banks millions in revenue. The Daily Mail quoted Dyfrig John, HSBC's chief executive, saying: "The credit card charges have crystallised the situation.

"We moved quickly to meet the regulator's regulation but it is clear that we have to look at our relationship with our customers fundamentally."

The reintroduction of current account charges is widely seen as a response to the OFT's move, with rival banks expected to follow suit. Indeed, banking experts have predicted that all current accounts will be subject to charges within a year.

It is widely forecast that these will take the form of an annual fee of £20-£25, levied at £2 a month for each card or account. Joe Garner, who heads the bank's personal finance business, said: "Banking is not free to provide but it is clear that people want to see exactly what they are paying for rather than incur hidden charges."

However, the announcement has been roundly condemned by consumer groups who claim that banks are cynically exploiting customers. UK current account holder have enjoyed free banking for almost 20 years after Midland Bank decided to do away with charges.