The Office of Fair Trading (OFT) has called for a major shake-up of current bank accounts, claiming that they do not work well for consumers.

Following its inquiry into personal bank accounts, the OFT said that many consumers do not know their account’s interest rate or how much they pay in bank charges.

Moreover, the complexity of the market, combined with a shortage of attractive offers from banks, means there is little incentive for consumers to switch providers, the OFT declared.

‘Personal current accounts are a vital gateway to effective participation in the economy. But this market is not serving consumers well,’ said OFT Chief Executive, John Fingleton.

‘Consumers lack the information they need to choose the best deal, and this in turn weakens the banks' incentives to compete.’

The watchdog is now calling for significant changes to address the flaws inherent in the £8bn industry.

However, the British Bankers’ Association (BBA) said it was ‘disappointed’ with the OFT’s report, arguing that the figures do not accurately reflect the cost of offering accounts to customers.

Research shows there are approximately 64 million accounts in the UK, of which 54 million are thought to be active.

The OFT believes banks earned the equivalent of £152 per active bank account in 2006 - that is more than savings and credit cards combined.