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The Financial Conduct Authority (FCA), the UK’s financial watchdog, has summoned bank CEOs to address concerns about the widening gap between savings rates and mortgage costs.
High-level executives from HSBC, NatWest, Lloyds, and Barclays are expected to attend a meeting at the FCA on Thursday. There are accusations that these banks are taking advantage of rising interest rates, leaving consumers at a disadvantage.
After the Bank of England’s 13th consecutive interest rate increase, raising rates to 5%, the average rate on a two-year fixed-rate mortgage has risen to 6.42%. However, the average rate on an easy-access savings account is only 2.43%, with many large banks offering even lower rates.
During the meeting, the FCA and the bank executives will discuss the pricing of cash savings and how banks communicate with customers regarding rates. There is a possibility of implementing a “savings charter” or a set of commitments to address these issues.
One individual familiar with the FCA’s position stated, “We believe that more value can be provided to consumers. We are not satisfied with the low savings rates we see and want banks to support customers and enable them to make informed choices.”
However, some attendees, including smaller lenders, consider the FCA’s intervention to be regulatory overreach. One CEO expressed concern that regulators dictating prices could result in a dangerous market environment.
Senior politicians have raised concerns about savings rates due to high inflation. The House of Commons Treasury select committee recently accused the four major banks of profiteering and squeezing profits from loyal savings customers.
The upcoming Consumer Duty, effective at the end of July, will empower the regulator to take action if banks are found to be behaving unfairly by keeping rates low.
At the meeting, attention may also turn towards current accounts, which typically offer lower rates compared to savings products.
Analysts predict that banks may focus on promoting higher fixed-rate savings offers to divert criticism of lower easy-access rates.
The FCA had previously expressed concerns about the savings market and proposed measures to simplify and increase transparency in interest rates. However, progress on these proposals has been halted due to the pandemic.
The FCA declined to comment specifically on the meeting but stated that it would report on the performance of the cash savings market by the end of the month. They will require the largest banks and building societies to explain their interest rate policies and how they are helping customers switch to high-interest rate products.
Barclays, Lloyds, HSBC, and NatWest chose not to comment on the matter.
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