The five largest institutions in Britain - Lloyds Banking Group, Barclays, HSBC, RBS/NatWest and Santander - are using the Â£100 billion sitting in current accounts to counter competition from smaller rivals, the Daily Mail reports.
According to the newspaper, the banks pay little or no interest on this money, which is kept in around 47 million current accounts.
It explained the practice is costing customers about Â£2.4 billion a year in missed interest.
Adrian Coles, director general of the Building Societies' Association, said the larger banks need to have their wings clipped.
He added: "For years they have been able to drown out smaller, nimbler competitors who have provided better customer service and offered better deals to customers."
A recent survey carried out by Ernst and Young on behalf of the Institute of International Finance suggested banks in the UK need to move away from a culture of risk.
By Asim Shah