Barclays, HSBC, Lloyds Banking Group, NatWest Group and the Financial Conduct Authority have outlined to MPs what work they are doing to improve savings rates for consumers.
Earlier this month, the Treasury Committee asked the chief executives of the UK’s largest banks if all their savings products provide ‘fair value’ to customers, whether customer inertia is being exploited and what steps they’re taking to notify their customers of higher rates available.
All four banks said all customers - both old and new - are being offered the same rates.
In its response, Lloyds said: “We take our obligations under the consumer duty seriously and have made a number of significant enhancements to support our customers, including improving and increasing our communications to help them make informed decisions, such as on the maturity of fixed rate savings products.”
The bank also said it launched a customer engagement plan earlier this year and is in the process of writing to customers who are most likely to benefit from higher earning products within its range.
“This includes customers who have recently matured from a fixed rate product but have not yet taken action; relevant current account holders eligible for preferential rates and those most likely to benefit from the Lloyds Advantage Saver and Halifax Reward Bonus,” it wrote.
Meanwhile, NatWest said it has used its ‘Start to Save’ campaign, launched in February 2020, to help 2mn customers save for the first time, while 600,000 more customers are regularly saving compared to January 2022.
“We also offer MoneySense (a free financial education programme for 5–18 year-olds), ‘Round Ups’ on debit card spend and a free Financial Health Check to our customers,” it wrote.
“We offer our customers a range of products and rates in what is a very competitive market, and we amend the price of products on an ongoing basis to reflect market conditions and our liquidity needs.
“Whilst the BoE rate is 5 per cent, we pay savings rates of up to 5.90 per cent on our two-year fixed product, and 6 per cent (up to £5,000) on our Digital Regular Saver (1.3mn accounts opened since it was introduced in 2020) to encourage customers to build resilience and save for the first time.”
NatWest said it has a set of pricing principles, aligned to the consumer duty, to help guide its decision making.
HSBC said it has worked to enhance its communications strategy, including the ability to nudge customers more frequently where it feels they could be better off using a different product or service, or where it can assist them in making the most of their finances.
Lastly, Barclays said it took proactive action, as early as 2019 and well before the introduction of the new consumer duty, to reduce its product range from 19 (in 2019) to 7 (in 2022) to make it easier for customers to understand what it has on offer.
The bank said it also aligned its “front-book” and “back-book” savings pricing so there is no distinction between older and newer customers and it also eliminated all but two “off sale” products.
“Our 'off sale' products now represent less than 3 per cent of our savings balances, held in only two products – the Help to Buy Isa (which the government took off sale) and currency deposits (a product in active run-off),” the CEO wrote.
Commenting on the responses, Harriett Baldwin, chair of the Treasury committee, said: “If the high street banks continue to pay poor savings rates on their instant access accounts, they should make sure their customers know that better rates are available.
“Given that the government, regulator and governor of the Bank of England agree with the committee that action is required, the time for weak excuses is over.”
Regulator’s response
Earlier this month, the committee also wrote to the FCA and asked about the incoming consumer duty - a requirement for firms to always act in good faith and deliver ‘fair value’ for their customers.
The regulator was asked how ‘fair value’ will be assessed, what action it can take if firms do not comply with the consumer duty, and how it will judge whether banks are making enough effort to encourage savers to switch to higher rates.
Following this, the FCA 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 its response today (July 18), the regulator confirmed that it expects firms to ensure customers are “informed of available rates across their product set and how they may benefit from switching”.
FCA chief executive Nikhil Rathi also said the regulator recognises that some firms will have other constraints.
For example, those that are close to the £25bn retail deposit threshold that would trigger the ring-fencing regime may choose to manage deposit rates so as not to breach the threshold.
“The government has indicated its intention to consult on raising this threshold to £35bn, which could have some potentially beneficial competition effects, which would need to be balanced against potential financial stability considerations,” he wrote.
“Our ongoing review will consider how well the savings market as a whole is supporting customers and we will set out our findings and next steps at the end of July.”
He explained that firms will need to go further than just notifying a customer at product maturity in order to be compliant with the requirements of the duty.
“This includes identifying groups of customers who may be better served by a higher rate product and considering what additional steps they can take to support these customers in switching where appropriate.”
Once the duty is in force, he said the FCA will continue to use data and insights to identify outliers and poor practice, intervening where firms fail to deliver good outcomes.
“In a context such as this we would typically give firms a period of time to remedy any problems we identify before commencing formal enforcement action, where necessary,” he said.
“Post implementation, we will carry out work to review firms’ support for customers in financial difficulty and firms’ approach to fair value.”
Baldwin added: “We thank the banks and the regulator for taking the time to respond to our letters.
“This is a topic of utmost interest to our committee and one we will continue to monitor closely, especially when the banks report their half year results in the coming weeks.”
sonia.rach@ft.com
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