UPDATE 1-EU, banks agree on account switching code -sources

(Adds background, second source)

By Huw Jones

BRUSSELS, Oct 9 (Reuters) - The European Commission and banks have agreed on a voluntary industry code to make it easier for people to switch their bank accounts, industry sources said on Thursday.

"I think there is an agreement between everybody concerned, the banking industry, Commission and consumers," a banking source involved in the talks said.

EU Internal Market Commissioner Charlie McCreevy wants to inject competition into the sector and bring down banking fees as part of wider moves to create a seamless single market in retail financial services.

McCreevy had threatened to legislate if banks failed to agree on a code. His spokesman had no comment.

The European Banking Industry Committee, made up of banking industry associations, met the EU executive on Thursday in a final attempt to avoid regulation being imposed.

"We have an agreement in principle on the voluntary approach," a second EU banking source added.

The EBIC declined to comment on the meeting.

The banking sources said some further tweaking of the industry code was anticipated before its final adoption by banks, probably at the end of October.

Talks between banks and the Commission have lasted for several months as McCreevy insisted that account switching should be free and completed within days.

One option put forward was to allow banks to levy a fee on a customer that closed an account within the first 12 months of opening it.

Banks said the Commission was also keen to compromise because legislation would need to be approved by the European Parliament and EU governments, which could take time and leave it vulnerable to major changes that could favour the industry. (Editing by Quentin Bryar)