Two commentators from opposite sides of the argument go head-to-head over the issue.

Angela Knight says bank profits are vital to a healthy economy

The UK's financial services sector is recognised around the world as being excellent.

So why is it that people in Britain currently love to hate the banks?

I believe it's partly because people look at the big profit figures, but the explanation of where banks make their money and what happens to those profits is not that clear.

International profits

Firstly, most of the profits actually come from wholesale banking. That's the financing of businesses and industry around the world.

It does not come from operating the personal bank accounts for you and me.

Then, of those profits, about one-third goes in tax.

The financial services sector is the largest single payer of Corporation Tax in the UK, so banks through their profits are directly helping pay for important services such as health and education.

Another third goes towards people's retirement, because banks' major shareholders are pension funds.

The rest goes back into the business - an industry providing work for about five million people, which processes, incredibly, seven billion transactions every year.

Quality services

Access to quality banking services has revolutionised everyday life.

It has never been easier to invest and keep tabs on your money, or arrange a loan for anything from a new car to a holiday in the sun.

Banks offer more and more services - from savings to insurance, from mortgages to foreign currency - and much of it comes free, as long as you keep your account in credit.

And even 20 years ago, it would have been unthinkable to believe that you could access your money around the clock.

Who does this?

Well, nowadays, about 40% of account holders are registered for telephone banking and another quarter on the internet.

I'm not saying banks are perfect, but surely they do not deserve to be hated.

Marc Gander argues that penalty charges are milking bank customers

It looks like another bumper year for the country's banks.

UK High Street banks have reported substantially increased profits, with Barclays up 35%, and the overall figure likely to be more than �40bn when everyone has checked in.

It would be foolish not to appreciate that a profitable banking industry is very good news for this country and the people of this country.

But it may not be good for all of the people of this country.

Included in the bank profits is a very substantial figure derived from delinquent accounts: penalty charges, to you and me.

Penalty charges

The law says that penalty charges may not exceed losses created by a customer's transgression, but all the banks charge large sums for bouncing direct debits or exceeding overdraft limits.

The going rate is about �30 or more for a procedure which, despite a recent estimate by a television panel of experts of �4.50, actually costs only about �1 per time - maximum.

This is a phenomenal mark-up by any standards and it is no secret that the banks are making big profits from these charges.

A Northern Ireland Competition report, published in late 2006, revealed figures contributed by eight banks which showed that about 12% of annual revenue is generated by "overdraft charges".

The generally accepted figure is that the banks earn about �4.5bn a year from penalty charges alone - and if bank profits this year do amount to more than �40bn, then the Northern Ireland figures tie in very nicely.

The Nationwide

Graham Beale, soon to be chief executive of the Nationwide building society, has already declared that it is unfair for delinquent accounts to be used to fund free banking for the rest.

This is a remarkable statement. At a stroke, it confesses the unfairness of the charges and admits that they are profitable, as they fund free banking for those who have fewer problems with their accounts.

Mr Beale has been with the Nationwide for more than 20 years as an accountant. He must know.

And he can look forward to being compelled to explain his statement in court, should his company attempt to resist its customers' claims for the return of their money.

Mystery

The mystery of banking profits to me is why they need quite so much.

What would be so shameful about making only �37bn this year - and yet making it fairly?

Surely a citizenry which "feels good" about itself, and even about the banking industry, is a thing to be desired.

Yet the banks threaten all of us with an end to free banking if they become obliged to give up their lucrative penalty charges regime.

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