The City regulator has urged the UK’s largest high street banks to “accelerate” savings rates following a meeting with chief executives, who admitted they needed to do more to support consumers after claims they were “profiteering” from high borrowing rates.
The Financial Conduct Authority (FCA) said it was largely a “constructive meeting” with bank bosses on Thursday, but “challenged firms where their decision making has been slow”.
Bosses including NatWest’s Alison Rose, HSBC UK’s Ian Stuart, Barclays UK’s Matt Hammerstein, and Lloyds Banking Group’s Charlie Nunn, were pushed to justify their decision to keep easy access savings rates low, while the cost of loans and mortgages has soared.
The average rate on a two-year fixed mortgage on Thursday was 6.52%, compared with just 2.49% for a typical easy-access savings account, according to Moneyfacts.
While some lenders including Lloyds and HSBC announced increases on some savings accounts just hours before the meeting, the FCA said: “We now want to see that progress accelerate.”
The regulator said in a statement: “Those in the room recognised that they needed to do more to help their consumers access the best rates. We too recognise there is a need for further guidance, and will continue our focus on this.”
Smaller lenders including Nationwide, Santander UK, and TSB, were also summoned to the meeting at the regulators’ headquarters in Stratford, east London, which was led by the FCA’s executive director of consumer and competition, Sheldon Mills. It was also attended by Treasury officials and the chief executive of the industry body UK Finance, David Postings.
The meeting was part of the FCA’s investigation into the savings market, due later this month. But regulators also used it as an opportunity to warn lenders they will have to continue to justify their pricing once new consumer duty rules come into force at the end of July.
The new regulations will force all City firms, including high street lenders, to show they are acting in good faith and prioritising customer needs, including their decisions on savings and mortgage rates.
All of the big four banks reported bumper profits in the first quarter of the year as they benefited from a surge in net interest income – which accounts for the difference between what they pay savers and what they charge borrowers.
NatWest reported a 50% jump in profits over the first three months of the year to £1.9bn, while rival Lloyds reported a 46% rise in earnings. HSBC tripled its first-quarter profits to $12.9bn, and Barclays revealed its largest quarterly profit since account standards changed in 2011.
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MPs on the influential Treasury committee have accused the banks of “profiteering” and failing in their “social duty” to promote saving across the UK.
Harriett Baldwin MP, the chair of the Treasury committee, said: “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.”
Barclays said earlier this week that it regularly reviewed its savings product rates, while HSBC said it had increased savings rates “more than a dozen times” since the start of 2022, and that its range of accounts offered customers choice on how to manage their money “with competitive returns”.
“The savings market is competitive, with a wide range of different accounts available to help people with their individual saving needs,” Postings said on Thursday. “We always encourage customers to shop around for the type of account that best suits them. We look forward to continuing to work with the regulator on this important topic.”
