Members of Parliament (MPs) have criticized high street banks for neglecting their “social duty” to promote savings and instead prioritizing “blatant profiteering” by offering low interest rates. The MPs raised their concerns in a recent correspondence with the chief executives of the UK’s four largest lenders, stating that the banks have failed to significantly increase returns on accounts that allow customers to freely access their funds and make withdrawals, despite the base interest rate rising to 5%.
Currently, the largest banks are offering rates between 0.9% and 1.75% on instant access accounts, while simultaneously increasing charges on loans and mortgages, resulting in higher profits for the banks. The Treasury committee expressed concern that the banks are taking advantage of customer inertia and risking non-compliance with upcoming city regulations that require them to justify their decision-making process.
Angela Eagle, a Labour MP and member of the committee, criticized the banks for profiting from loyal savings customers during a time of financial hardship. She highlighted the discrepancy between their behavior and the expected requirement for firms to treat customers fairly and with respect.
The MPs have called on the chief executives of NatWest, Lloyds Banking Group, Barclays, and HSBC to demonstrate whether their low savings rates align with the incoming regulations. These regulations, known as consumer duty rules, will come into effect at the end of July and will demand that all City firms, including banks, disclose pricing decisions, demonstrate good faith, and prioritize customer needs.
Harriett Baldwin, the chair of the committee, emphasized the importance of the biggest high street banks in encouraging saving and urged them to improve their current savings rates in response to rising interest rates and the financial pressure faced by constituents. The committee expects a prompt response from the bank bosses addressing these crucial concerns.
The bank executives have until July 17th to respond to the letters from the committee. In addition to contacting the bank CEOs, the MPs have also reached out to Nikhil Rathi, the leader of the Financial Conduct Authority (FCA). The regulatory body has already begun examining whether banks are treating customers fairly when setting savings rates.
Rathi is being urged to provide examples of banks adjusting their rates due to FCA pressure and to clarify how the regulator will evaluate banks’ efforts. Furthermore, the FCA is being pressed to confirm the repercussions for banks that fail to comply with the new rules.
The FCA has announced that it will release a report on the state of the cash savings market by the end of the month and is actively encouraging banks to explain the speed and extent of changes to their savings rates. The regulator assured that it will address the committee’s letter in due course.
HSBC responded by stating that it has raised savings rates more than a dozen times since the beginning of 2022, offering customers a range of accounts with competitive returns and the option to manage their money as they choose.
Barclays stated that it regularly reviews its savings product rates, while NatWest and Lloyds were also contacted for comment but have not responded as of yet.
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