Financial watchdog warns banks to offer ‘fair and competitive saving rates’
Bosses of the big four high street banks were urged yesterday to accelerate savings rates by the Financial Conduct Authority (FCA).
The bosses of Lloyds, HSBC, Natwest and Barclays met the FCA yesterday to discuss claims the banks aren’t passing on interest rates to savers as quickly as they could be.
It comes as the Bank of England (BoE) has successively raised the base rate over the last 13 months, to its current level of 5%. In response many banks have increased the interest they charge on mortgages and the average two-year fixed-rate mortgage has now breached 6%.
Yet the big banks have been criticised for not increasing savings rates at the same pace. Earlier this week, the Treasury Committee wrote to the four banks and to the FCA to ask if the banks believe all their savings rates provide ‘fair value’ to customers and whether customer inertia is being exploited.
The committee said when it began its inquiry into retail banks in February, the big four banks offered between 0.5% and 0.65% for easy-access savings rates. Today, they offer rates between 0.9% and 1.75%. The market-leading easy-access account currently pays 4.35% and it comes from Family Building Society.
The FCA said in a note regarding yesterday’s meeting that “many people are feeling the squeeze from rising interest rates and prices, so it is more critical than ever that they are offered fair and competitive saving rates”.
It said the meeting with the banks had been “constructive” and it builds upon work which has been ongoing for “several months” to “monitor the savings markets and the decisions made”.
Ahead of the FCA’s Consumer Duty, due to come into force at the end of July, which will require firms to put consumer interests at their heart, the regulator said it had started to see some “positive action by banks and building societies to improve their rates”.
‘We now want to see that progress accelerate’
It said: “We now want to see that progress accelerate. We are also increasingly seeing customers switching their savings products to those with higher rates. We continue to urge savers to shop around to make sure they’re getting the best deal.
“Those in the room recognised that they needed to do more to help their consumers access the best rates. We too recognise there is a need for further guidance, and will continue our focus on this.”
The FCA is also due to issue a report at the end of July into how the savings market is supporting people to benefit from higher interest rates and what further steps need to be made by financial institutions.
‘Bitter pill to swallow for savers’
Myron Jobson, senior personal finance analyst for interactive investor, said: “Paltry savings rates offered by leading banks are a bitter pill to swallow for savers whose wealth is being eroded by a double whammy of inflation and rising borrowing cost.
“The FCA has attempted to coerce big banks into taking action by shining a light on the issue until it is handed power to take stronger action under the Consumer Duty framework which comes into force at the end of July, and will require banks to show their customers get a fair deal.
“However, any reprieve in cash savings rates is being drowned out by the stubborn persistence of high inflation – with the real value of savings remaining in the doldrums. Those who can afford to put money away for five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates.”