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A heavy handed approach by the regulatory authorities could bring an end to free banking in the UK, the industry has warned.

The British Bankers' Association (BBA) said its members offered their customers a range of services from direct debits and standing orders to cheques and overdrafts without charge, unlike their European counterparts.

Banks have been heavily criticised for the penalty charges they impose when customers exceed their overdraft limits or miss a credit card payment, with calls for caps to be imposed.

Angela Knight chief executive of the BBA told the Today programme this morning that these charges were part of a delicate business model and that any additional regulation could be bad for customers.

"There are always consequences of change," she said. "If the regulators do just take a very narrow view and they start to try and change the business model then clearly there are going to be consequences."

Ms Knight added: "As far as we're concerned we want to continue to offer individuals free banking and we hope the regulator's changes and indeed criticism over profits don't change the arrangements that we have."

Earlier this week, Graham Beale, the incoming chief executive of Nationwide, said it might be "fairer" to end free banking.

Under the present system, Mr Beale explained, what he called "delinquent accounts" shouldered a larger proportion of the costs faced by banks and building societies.

The debate over bank charges has been revisited this morning because of the record profits announced by Barclays.

The high street bank made more than £7 billion last year, up 35 per cent on 2005.