The Competition Authority's proposal to abolish legislation that forces banks to apply for regulatory approval before increasing their fees should be ignored, Fine Gael said yesterday.

In an open letter, the party's deputy leader and finance spokesman, Mr Richard Bruton, said consumers were vulnerable to big hikes in banking fees if the current controls were abolished.

Mr Bruton said the existing legislative controls were one of the few provisions that were effective in protecting consumers.

"If this provision had not been in place, the recent welcome pattern where banks have been forced to pay back consumers for overcharging would never have happened. The concept of bank overcharging would be airbrushed out of our consumer law," he wrote.

Mr Bruton says the report's main concern - that the cost for banks of regulating charges acts as a deterrent for new entrants - could be assuaged by exempting these companies from the regulation for a number of years.

Last week a Competition Authority report into the banking sector recommended removing the legislative controls on fees in an attempt to bring more competition into the market.