By Huw Jones
LONDON (Reuters) – Britain’s banks are not passing on higher interest rates to savers fast enough, though this is expected to accelerate in coming months as a new duty to provide good outcomes for consumers comes into force, UK financial regulators said on Wednesday.
Interest rates in Britain have risen from record lows near zero percent during the COVID-19 pandemic to 5%, with more rises expected to quell inflation, sending borrowing costs higher.
Rate rises for savers have lagged, however.
“The pace has simply not been fast enough,” Financial Conduct Authority Chief Executive Nikhil Rathi told parliament’s Treasury Select Committee.
The duty comes into force on July 31 and Rathi told lawmakers it was the watchdog’s most significant intervention across all types of firms in two decades.
It had faced pushback from firms, calling for a delay, but FCA Chair Ashley Alder said many of the concerns have eased in the face of a “step change” in supervision.
“We are now in a good place, it’s about what happens next. The promise here is this will make a very significant difference to consumers,” Alder said.
“You do not take advantage of customer inertia,” Alder said, adding that the regulator does not set prices.
The duty, however, will make it easier for the FCA to be “very robust” in dealing with banks who are not proactive in telling customers that better savings deals are available, Rathi said.
Building societies typically offered the best deals, followed by online lenders, with high street lenders last, he said, adding that the watchdog will intervene at outliers.
There is no need for a formal “savings charter” among banks on savings rates given the watchdog needed to be careful about coordinating pricing decisions in what is a “reasonably competitive market”, Rathi said.
(Reporting by Huw Jones; Editing by Peter Graff and Bernadette Baum)
