The bosses of the biggest UK banks have been called to a meeting later this week with the Financial Conduct Authority over concerns their firms are being too slow to pass interest rate increases on to savers.
(Bloomberg) — The bosses of the biggest UK banks have been called to a meeting later this week with the Financial Conduct Authority over concerns their firms are being too slow to pass interest rate increases on to savers.
Top executives from lenders including Lloyds Banking Group Plc, HSBC Holdings Plc, Barclays Plc and NatWest Group Plc are expected to attend a meeting with the regulator on Thursday, according to a person familiar with the matter. The agenda will cover the market for easy-access cash savings and how banks communicate with their customers.
The UK is trying to put pressure on lenders to ensure they’re passing on changes in interest rates as quickly to savers as they are doing to mortgage holders and other borrowers. On Tuesday, the average two-year fixed-rate home loan was 6.47% while the average easy access savings rate was 2.45%, according to Moneyfacts Group Plc.
The meeting comes even as the prevalence of fixed rate mortgages means returns on savings are rising faster than the cost of mortgages for many householders, according to an analysis of Bank of England data by Bloomberg. Households are in aggregate around £10 billion ($12.7 billion) a year better off as a result of higher rates.
But that’s little consolation to the thousands of householders each month facing steep rise in their mortgage bills as their fixed rates deals expire. The disparity with the rates offered to savers has stirred public ire and lawmakers have already been pressing banks over the issue.
Read More: UK Savings Growth Helps Blunt Rising Household Mortgage Pain
The meeting could result in a set of commitments from the banks, according to the Financial Times, which reported the news earlier. The FCA declined to comment.
Bloomberg Intelligence calculated this month that about 50% of the changes have been passed on by UK lenders to savers since rates started to rise in late 2021. This so-called deposit beta may easily exceed 60% as competition for deposits — and political pressure — continues to mount.
“It does sound like profiteering,” Johnny Mercer, a government minister in the Ministry of Defence, told Sky News on Tuesday. “Interests rates are going up and the government wants to see them passed onto savers,” he said.
What Bloomberg Intelligence Says
UK’s £1.7 trillion of retail deposits are becoming increasingly important for banks’ revenue prospects in 2023-24, with political pressure to accelerate repricing of savings products intensifying on stubbornly high inflation.
Tomasz Noetzel, BI senior industry analyst
Still, Chancellor of the Exchequer Jeremy Hunt and Prime Minister Rishi Sunak are under pressure to show they understand the pressures on household budgets. With inflation proving particularly sticky at more than four times the official target, the economic pain threatens to further dim the chances of the Conservative government overturning a double-digit poll deficit on Labour to win a general election that’s expected next year.
–With assistance from Alex Wickham and Damian Shepherd.
(Updates with details throughout.)
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