Banks including HSBC Holdings Plc, Barclays Plc and NatWest Group Plc have only passed through about a quarter of interest rate rises to savers, the Financial Conduct Authority said, as it warned of “robust action” for firms that don’t transfer benefits to consumers.
(Bloomberg) — Banks including HSBC Holdings Plc, Barclays Plc and NatWest Group Plc have only passed through about a quarter of interest rate rises to savers, the Financial Conduct Authority said, as it warned of “robust action” for firms that don’t transfer benefits to consumers.
Nine of Britain’s biggest lenders such as Lloyds Banking Group, Banco Santander SA and Virgin Money UK Plc reflected an average of 28% of base rate rises between January and May in their savings offers, compared with an average of 80% in the five years through 2009, the FCA said in a report on Monday.
With the Bank of England lifting rates 13 times from almost zero in the past two years in an attempt to tackle inflation, lenders are under increasing scrutiny on feeding this into the savings market. Banks are also facing pressure to ensure access to financial services more broadly, after NatWest’s decision to close Nigel Farage’s account sparked a political firestorm that led to Alison Rose resigning as chief executive officer last week.
The Financial Conduct Authority introduced a long-planned consumer duty on Monday that requires banks to ensure they act in the best interests of retail customers on a range of issues.
From the end of August, firms offering the lowest savings rates will have to justify how they offer fair value under the new consumer duty, the FCA said. By the end of the year it will take “robust action” against firms that can’t demonstrate such value.
“We will be taking significant supervisory steps to ensure firms are getting on with this,” Sheldon Mills, executive director of consumers and competition at the regulator, told journalists at a press conference. “If we see low savings rates and those continue we’ll work with banks to make our views known and will consider what actions to take.”
The FCA will publish a list of firms’ instant-access savings rates every six months, ranking them from best to worst.
As of May, 60% of deposits from the nine firms were held in instant access accounts. Banks have been transferring rate rises more successfully on noticed and fixed-term deposits, with the pass-through rate reaching 51%. The FCA said firms need to step up communications with customers about their options and a measure the effectiveness of this.
“We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes,” the FCA said in a statement. “We continue to urge savers to shop around.”
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