The FCA is to undertake a study into the £1 trillion UK cash savings market, designed to assess whether competition is working effectively, Martin Wheatley has announced.
The FCA chief executive said the market study, which was announced on Monday morning, will investigate a range of issues including the effects of ‘teaser rates’ where institutions give introductory interest rates to new customers, and how often consumers switch their savings accounts.
Mr Wheatley said: “Promoting effective competition and ensuring that markets work well for consumers is a key objective for the FCA.
“We will be undertaking a programme of work and research that will enable us to have a better understanding of how the markets are working and the dynamics that drive both them and the decisions that consumers make.
“In looking at cash savings, we will examine an area that affects most people and see if there is action we need to take. This is exactly the sort of area I want the FCA to be operating in.
“We know that switching rates are low for financial services products and savings accounts are no exception. Even when people do switch their accounts, they are twice as likely to go with their existing provider than move to the offering of a competitor.”
FCA data shows that more than 80 per cent of all adults in the UK have some sort of cash savings account.
An announcement by the FCA said it was “keen to assess what it can do to ensure firms offer consumers the best returns possible and information that meets their needs”.
Market studies will enable the regulator to take a holistic look at competition in a market, assessing how consumers and firms behave and interact.
As part of the study, the FCA will also consider whether a market study is required on annuities once the thematic review on the subject concludes towards the end of the year.
The FCA will also invite evidence early next year as part of a wholesale strategic review to look at the way competition works between firms in financial services to ensure that consumers get a better deal.