The Financial Conduct Authority said it held a “constructive meeting” with lenders which builds on work it has been doing over several months to monitor the savings markets.
In a statement published yesterday (July 6), the FCA said many people are feeling the squeeze from rising interest rates and prices, so it is more critical than ever that they are offered fair and competitive saving rates.
“We have challenged firms where their decision making has been slow,” it said.
Through preparation for the new consumer duty, which requires firms to put consumer interests first, the FCA said it has started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products.
“We now want to see that progress accelerate,” the regulator said.
“We are also increasingly seeing customers switching their savings products to those with higher rates. We continue to urge savers to shop around to make sure they’re getting the best deal.”
The City watchdog said it wants to see a competitive market with fair value retail banking products – and with banks helping consumers to access them.
The regulator held a meeting yesterday (July 6) and discussed how the consumer duty will set a new standard for firms from the end of July, including on savings rates.
It set out that expectation to bank and building society leaders in the meeting.
“Those in the room recognised that they needed to do more to help their consumers access the best rates,” the FCA said.
“We too recognise there is a need for further guidance, and will continue our focus on this.”
The FCA said it has previously committed to reporting at the end of the month on how the savings market is supporting savers to benefit from higher interest rates and it will set out then whether further steps are needed.
This comes as earlier this week, MPs stepped up their campaign over the fairness of the savings rates banks are paying customers and argued that the interest paid on instant access accounts in particular is too low.
In a letter sent to the chief executives of the UK’s largest banks, the Treasury Committee asked bank bosses if they believed all their savings rates provided fair value to customers.
MPs also demanded an answer to whether the bank bosses believe the inertia of savers is being exploited.
Commenting on the FCA's statement, Harriett Baldwin, chair of the Treasury committee, said: "As a committee, we’ve been questioning the high street banks on their poor savings rates all year, and it’s clear that savers have been getting a raw deal for too long.
"While it’s welcome to hear the banks recognise further action is required, it’s time to see an acceleration in progress. We will be following developments closely and will be particularly alert to any apparent foot dragging.
“Earlier this week, we wrote to the biggest banks and the regulator on this issue, and we look forward to receiving their responses soon.”
Bitter pill
Elsewhere, Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Paltry savings rates offered by leading banks are a bitter pill to swallow for savers whose wealth is being eroded by a double whammy of inflation and rising borrowing cost.
“The FCA has attempted to coerce big banks into taking action by shining a light on the issue until it is handed power to take stronger action under the consumer duty framework which comes into force at the end of July, and will require banks to show their customers get a fair deal.”
However, Jobson said any reprieve in cash savings rates is being “drowned out by the stubborn persistence of high inflation”, meaning the real value of savings remaining in the “doldrums”.
“Those who can afford to put money away for five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates,” he said.
Elsewhere, Rocio Concha, director of policy and advocacy at Which, said it is unacceptable that some banks are failing to offer competitive savings rates, despite both the Bank of England and Financial Conduct Authority urging the industry to act faster to pass on higher interest rates.
“While it is true that consumers can shop around for a better deal, they should be treated fairly by their bank whether they switch or not,” Concha said.
“The regulator must continue to hold banks’ feet to the fire to ensure they do the right thing.”
sonia.rach@ft.com
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