Savings accounts have received up to 60% of the recent rate increases, according to four UK banks. They have denied that politicians are wrong in accusing them of profiteering.
The Treasury Select Committee released on Tuesday the banks’ answers to its questions about whether they had been too slow in passing along rate increases to consumers. This correspondence came as regulators reminded banks that data protection laws do not prevent them from letting customers know about better offers.
Financial Conduct Authority has already warned bank managers that they must make more progress in improving the savings rate. Since the FCA’s meeting with banks on 7 July, there are signs that offer levels have increased.
The parliamentary committee sent a letter to the heads of Lloyds Banking Group (LBG), NatWest, HSBC, and Barclays in early August, citing their concerns that these banks are not providing good value for money on savings despite base rates rising by 5 percent last month.
Alison Rose, the chief executive of NatWest, said in her response that the bank has passed on over 60% of the impact of increased base rates through its instant-access savings accounts during the first half year.
She added, “We offer a variety of products at competitive rates to our customers. We also adjust the prices of our products regularly to reflect changes in market conditions and liquidity requirements.”
The committee found that the four banks offered easy access rates between 0.9% and 1.75 percent, which is below the Moneyfacts average of 2.62 percent.
Harriett BALDALD, Conservative Chair of the Committee, said: “If high street banks are still paying poor rates on instant access accounts they should let their customers know about better rates available.” The time for excuses that are weak is over.
Some lenders claimed that they told their customers when they can move money from lower-value accounts to higher-value accounts.
Matt Hammerstein, the UK chief executive of Barclays, said: “We contact our customers proactively to encourage them to think about whether their money is performing as well as it could and to explore their options at Barclays.”
According to sources familiar with the matter, in the FCA meeting banks claimed that they could not inform savers, who have opted out from marketing communications, about better offers.
A letter sent on Tuesday by the FCA, the Information Commissioner’s Office, and UK Finance to the banking lobby, UK Finance, refuted this argument.
Watchdogs stated that banks are required to provide consumers with neutral and factual information about how to switch to higher-rate products, even if they have not opted in to direct marketing.
The regulators stated that it is now more important than ever for firms to make sure their customers receive fair value from their savings. We expect this letter, along with existing guidance materials, to provide sufficient clarity for firms in their communication efforts that support saving customers.
The committee has also published correspondence between the FCA’s chief executive Nikhil Rathi and themselves. Rathi is scheduled to appear before them on Wednesday.
He stated that some lenders may choose to manage their deposit rates to avoid exceeding the threshold due to UK ringfencing regulations that separate lenders’ investment and retail banking arms. These rules impose higher costs to banks if they exceed a £25bn limit.
Last year, the government announced it would consult about raising the limit from £35bn to £40bn. Rathi said that while it could boost competition, “potential financial stability concerns would need to be weighed against this”.