Banks have been given four weeks to justify low savings rates compared with the city regulator before facing “robust measures” as part of a new crackdown on the UK savings market.
The deadline is part of a 14-point action plan unveiled on Monday by the Financial Conduct Authorityy
Lenders with the lowest savings rates have until the end of August to explain how these rates represent fair value for customers. Those who fail to justify their pricing decisions will face “robust measures” by the end of 2023, the watchdog said, adding that all powers – including fines – were at its disposal.
The FCA’s plan is to monitor how quickly banks pass on savings rates to customers and publish an analysis of companies ‘ easily accessible savings rates, naming and shaming laggards. Lenders should also encourage customers to look for accounts that offer higher interest rates.
Although the FCA does not expect banks to match the Bank of England’s key interest rate – which has reached 5% and is expected to rise for 14 consecutivo
“In our view, in the absence of exceptional circumstances, you should think about [changing savings rates] a few weeks after a change in the base rate and review your pricing decisions to postpone your savings rates. And it’s about bringing value to savers, ” said Sheldon Mills, FCA’s executive director in charge of consumer and competition.
This follows the monthly savings market review, which found that nine of the largest savings providers – including LlodsDs, natWEst, HSBC, Santander UK and Nationidebetween January 2022 and May of
This means that the average interest rate on these accounts only increased from 0.07% to 1.25% during this period, although the Bank of England interest rate increased from 0.25% to 4.5%.
Even with temporary savings deposits requiring customers to keep their money for a certain period of time, only 51% of the base increases were passed on to customers. This compares with an average transfer of 80% of rate increases between 2004 and 2009, the FCA said.
The regulator said it will” conduct a more in-depth analysis ” to examine how cash savings contribute to the bank’s profits. The rate increases have led to an increase in the profits of many high street banks, including natW
Mills said: “We want a competitive cash savings market that offers better deals to savers, where interest rates are quickly revised after changes in base rates and companies ask savers to switch to accounts that pay higher rates.
“We welcome the progress made so far, but this needs to be accelerated. We will use consumer duty to make sure of this – with companies having to prove to us that they offer fair value to their customers.”
While Britain’s big four banks-LlodsDs, HSBC, NatW
Rocio Concha, Director of Policy and advocacy”Some high street banks have been offering meagre interest rates to their customers for a long time, and it is clear that the pace and extent to which rates are passed on to customers needs to be improved.”
FCA’s 14-point Plan in its entirety
The FCA becomes:
1. banks that offer the lowest savings rates must justify their decisions, while those that cannot prove fair value By the end of 2023 face “robust measures”.
2. Check how quickly banks change their savings rates after the Bank of England’s interest rate decisions.
3. it publishes an analysis of banks ‘ easily accessible savings rates and lists deals from best to worst.
4. analyze the differences in interest rates between savings products currently offered and those that are closed to new customers. The FCA will ask banks to explain the differences and will consider action if the gap is not closed.
5. Check to see if banks are making it easier for customers to switch between cash ISA accounts.
6.carry out additional checks on how cash savings contribute to the bank’s profits.
7.By at the end of March 2024, review how companies interact with customers and take action if companies do not achieve the results planned by the FCA.
8.work with groups, including the Mone servizio and Pensions service, to find out what else can be done to help customers save regularly and build their financial resilience.