The City regulator has called on the largest high street banks in the UK to increase savings rates, following a meeting with their chief executives. The banks admitted that they needed to do more to support consumers, as there have been claims of “profiteering” from high borrowing rates. The Financial Conduct Authority (FCA) described the meeting as largely constructive, but also challenged the banks for being slow in their decision-making.
During the meeting, bosses from NatWest, HSBC UK, Barclays UK, and Lloyds Banking Group were questioned about their decision to keep easy access savings rates low, while the cost of loans and mortgages has risen significantly. Moneyfacts reported an average rate of 6.52% for a two-year fixed mortgage, compared to just 2.49% for a typical easy-access savings account.
Although Lloyds and HSBC announced increases in some savings accounts just before the meeting, the FCA stated that it wants to see progress accelerating. The regulator acknowledged the need for further guidance and stated that it will continue to focus on this issue.
Smaller lenders like Nationwide, Santander UK, and TSB also attended the meeting. Led by the FCA’s executive director of consumer and competition, Sheldon Mills, the meeting was part of the regulator’s investigation into the savings market, which is set to be published later this month. However, it was also an opportunity for regulators to warn lenders that they will have to continue justifying their pricing once new consumer duty rules take effect at the end of July.
Under these new regulations, all City firms, including high street lenders, will be required to demonstrate that they are acting in good faith and prioritizing customer needs when determining savings and mortgage rates.
The big four banks, including NatWest, Lloyds, HSBC, and Barclays, have all reported significant profits in the first quarter of the year due to a surge in net interest income. NatWest’s profits jumped by 50%, Lloyds reported a 46% rise in earnings, HSBC tripled its first-quarter profits to $12.9bn, and Barclays reported its largest quarterly profit since 2011.
In response to accusations of profiteering, Barclays stated that it regularly reviews its savings product rates, while HSBC claimed to have increased savings rates more than a dozen times since the beginning of 2022, offering customers a range of accounts with competitive returns. The CEO of UK Finance, David Postings, highlighted the competitiveness of the savings market, emphasizing the importance of customers shopping around to find the account that best suits their needs.
MPs on the Treasury committee have criticized the banks for profiteering and failing in their social duty to promote saving across the UK. Harriett Baldwin MP, the chair of the committee, called for an acceleration in progress, and expressed that they would closely monitor developments and be vigilant against any perceived delays.
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