Banks and building societies could be forced into an early compromise in the long-running battle against the Office of Fair Trading over the legality of bank charges, it emerged today.

Gordon Brown has written a letter to bank charges campaigners calling on current account providers to "explore a quicker way to resolve this".

In the letter the Prime Minister called on regulators and banks and building societies to work out a “negotiated solution” so that the dispute could be resolved “without delay.”

He added: "People need to have confidence that, when they open an account, they will be treated fairly, charges and fees will be transparent and reasonable and that savings will be safe."

The Supreme Court is currently deciding whether the Office of Fair Trading (OFT) should be allowed to investigate whether overdraft charges are fair. The ruling could eventually result in current account providers being forced to refund billions of pounds in charges.

The intervention of the Prime Minister in the debate over charges comes after the taxpayer-controlled Royal Bank of Scotland, along with its subsidiary NatWest, announced a radical shake-up of their charging structure which saw some overdraft fees fall from £38 to £5.

Earlier this week Halifax and the Bank of Scotland, both part of the Lloyds Banking Group which is 70 per cent controlled by the taxpayer, also announced plans to cut overdraft charges.

The moves have put pressure on other banks to follow suit and reduce fees, which can be up to £39 for going into the red.

The OFT believes the charges are disproportionate and wants to carry out an investigation under the Unfair Terms in Consumer Contracts Regulations 1999.

Martin Lewis, of MoneySavingExpert, the consumer website, said: "This is a major signal bank charges has been pushed up the Government agenda. Assuming the Supreme Court rules that fairness rules apply, as the OFT's already indicated it believes charges are unfair, it's game on.

"Yet the worry is banks will mount a further legal challenge to the OFT's ruling, traipsing through the courts again, and this is where the PM comes in. By pushing for a negotiated settlement we could get a quick solution.

"This type of settlement will mean reclaimers won't need to go to court or the Ombudsman. They will simply be able to write to their provider and request a payback."