FCA vs UK Banks: Comment

Today the FCA met with the UK’s biggest banks to discuss poor savings rates and claims of profiteering.

 
As await word on the outcome, below I have three comments from personal finance industry experts, stressing the need for action and why it is so disappointing (and damaging) that banks are not passing higher rates onto customers.
 

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said: “Customers should be rewarded for their loyalty, not punished. After months of pressure from both the Government and regulators, the fact that many high street banks are still failing to pass on base rate hikes to savers means they are falling short of their duty to loyal customers.

“High street lenders are often quick to pass on increases in the base rate to borrowers, while the savings market lags behind. Currently, the average two-year homeowner mortgage rate sits at 6.42%, while savers have to make do with a measly 2.45% on the average easy-access savings account – this isn’t the ‘fair value’ that customers need in the middle of a cost-of-living crisis, particularly for longstanding customers who may be less comfortable with online banking.

“It has never been more important for savers to consider all of their options and shop around for better rates. Some of the most competitive products on the market right now come from challengers, while many fixed-rate accounts are topping the base rate.”
 

Lily Megson, Policy Director at My Pension Expert said: “It is distressing that financial services firms still aren’t putting clients first. Higher interest rates ought to mean better returns for savers. Yet, despite soaring profits, many banks are failing to reward their loyal customers through better rates on savings products. It’s a slap in the face for hardworking Britons who are feeling the financial squeeze of the cost-of-living crisis, and it is only right that the FCA investigates the issue.

“Loyalty should be rewarded, not taken advantage of. And this certainly applies to those in their 50s and 60s, who have typically accumulated greater savings pots but might be less likely to switch between financial providers. Not enough is being done to protect the interests – and interest rates – of those nearing retirement.

“Until action is taken, it is essential that savers consider all the options that are before them. However, in the hunt for better rates, any decisions must be taken after careful consideration – where people’s hard-earned retirement savings are concerned, seeking independent financial advice is a must. This will ensure their money works hard for them, but also that they remain on track to meet their individual financial goals.”
 

Moshin Rashid, CEO of ZIPZERO, said: “Where is the solidarity being shown to loyal customers? As we’ve seen time and time again over the past 18 months, retail banks are happy to pass on higher interest rates to borrowers at lightning speed – yet drastically trail behind in boosting savings rates.

“While consumers continue to battle astronomic inflation, over the long-term, better interest rates could help boost the dwindling real-term values of savings. In the short term, it would encourage savers to save, helping to soften inflationary pressures.

“Despite the current economic climate, it seems as though a consistent theme of overcharging by large corporations has emerged across sectors. Consumers are rightly fed up with this, so it is encouraging that the FCA is investigating this issue.

“While we await the outcome of this investigation, I would encourage consumers to be savvy and unafraid to shop around to find the best products. Meanwhile, banks and retailers more generally should consider the long-term impact of their decisions – those that reward loyalty and support consumers through these challenging times will be the ones to emerge strongest.”
 

Gareth Mills, Partner at law firm Charles Russell Speechlys:

“The news that Jeremy Hunt agreed a new action plan with the heads of key regulators, including the Competition and Market Authority (CMA) and Financial Conduct Authority (FCA), to protect consumer interests in the face of rising inflation seems to have gone largely unreported, but recent announcements indicate that the mandate is being taken seriously by regulators.

The FCA’s approach will be particularly interesting as its new “Consumer Duty” framework comes into force at the end of July 2023 and will empower the FCA to set higher and clearer standards of consumer protection across the financial services sector and require firms to put their customers’ needs first. How they enforce those requirements is likely to form a large basis of this week’s discussions with the big banks”.