MPs have 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 today (July 3), 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.
The committee has also written to the FCA, asking if banks have changed their savings rates as a result of the regulator challenging them, how ‘fair value’ for customers will be assessed, and what enforcement action can be taken if firms do not comply with the consumer duty.
It is only right that the UK’s biggest banks step up their measly easy access savings rates. The time for action is now.Dame Angela EagleSpeaking on the correspondence, MP and TSC member Dame Angela Eagle, slammed the apparent lack of action.
She said: “In the middle of a cost of living crisis, the high street banks are squeezing higher profits from their loyal savings customers.
“This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect,” Eagle said.
The letters come as financial institutions enter the final weeks of preparation ahead of the July 31 deadline for the implementation of the consumer duty when banks will need to demonstrate that their products offer fair value for customers.
The letter to banks were sent to the heads of Barclays, HSBC, Lloyds Banking Group and NatWest Group.
It followed on from the responses received by the Treasury Committee in June from a number of bank bosses in which they outlined how their savings rates are set.
According to the Treasury, when it first began its inquiry into retail banks in February, the big four banks offered between 0.5 and 0.65 per cent easy access savings rates.
Today, the big four offer rates between 0.9 and 1.75 per cent.
This is despite the Bank of England increasing the base rate to 5 per cent in June, after inflation figures for May came in higher than anticipated.
Member of parliament, Dame Angela Eagle, who is a member of the Treasury Committee slammed the apparent lack of action.
She said: “In the middle of a cost of living crisis, the high street banks are squeezing higher profits from their loyal savings customers.
“This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect,” Eagle said.
The actions of banks and building societies have been under the microscope in recent months due to the slow speed at which they have passed the higher base rate through to savers, despite being much quicker to pass the increase through to mortgage borrowers.
In today’s letter sent to banks, MPs said that they remain concerned that banks’ savings rates remain too low, particularly in instant access accounts.
It also noted that major banks have reported strong growth of profits and net interest margins in the first three months of the year.
MPs asked the banks to outline how the consumer duty will change the way they set their rates on savings accounts and if they are confident that the duties of the regulation are currently being met in relation to savings accounts.
They also wanted to know what steps banks are currently taking to notify their customers of the benefits of switching to higher rate products, particularly where customers have savings in instant access savings accounts.
Elsewhere, MPs also wrote to the Financial Conduct Authority today to ask it to outline how it will judge what is fair value.
MPs also wanted the FCA to point to examples of where a bank has changed its rates as a consequence of the regulator challenging them.
Chairperson of the Treasury Committee, Harriett Baldwin said that currently banks are failing on their social duty.
“With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK’s biggest banks step up their measly easy access savings rates. The time for action is now,” Baldwin said.
She also noted that the biggest banks have a “particularly important role to play in encouraging saving”.
Banks were asked to respond by July 17 while the FCA was asked to reply by July 14.
A Barclays spokesperson said: “We continue to remain committed to providing our customers with a range of options to help them save for their goals and regularly review our savings product rates."
FTAdviser approached HSBC, Lloyds Banking Group and NatWest Group for comment.
jane.matthews@ft.com
