MPs turning their attention to what FCA is doing to ensure savers are getting a fair deal.
The antics employed by banks in offering uncompetitive savings deals are coming under a greater spotlight, after MPs ordered the financial regulator to explain what it is doing to protect savers.
The Treasury Select Committee last month quizzed the heads of four of the biggest banks in the UK ‒ Barclays, HSBC, Lloyds Banking Group and NatWest ‒ on the low rates of savings offered to customers.
It pointed out that until very recently, all four of these banks offered less than 1% interest on their easy access savings accounts.
That is a rate that would have been far from enticing over recent years, when Base Rate was set at its record low of 0.1%.
Yet we have seen the Base Rate increased repeatedly to its current level of 4.25% at the time of writing, and those increases have seen the typical rates offered on easy access accounts improve to much more attractive levels.
For example, right now the highest rate on offer on an easy access account is 3.4% through Chip, far higher than what you might achieve from our biggest banking names.
What is the regulator doing?
Now the chair of the select committee, Harriet Baldwin, has written to the Financial Conduct Authority (FCA) to question what the regulator is doing to improve the prospects of savers.
The committee wants the regulator to make clear that it is ensuring that there is “effective competition” for savings deals, and that “banks are not relying on consumer inertia” to allow savings rates to creep up more slowly than the interest rates charged on mortgages.
Baldwin noted that the FCA had previously proposed rules where all savings providers would set a single easy access rate which savings accounts would offer after the initial 12-month period.
These plans were shelved amid the pandemic, but it’s open to question why they have not been returned to.
The FCA was also told to outline how it is ensuring that existing customers of banks do not suffer a loyalty penalty, where they end up with far more mediocre returns than those offered to new savers.
Letting savers down
Unfortunately, there is no shortage of ways in which banks have been playing fast and loose with the concept of supporting savers.
As we highlighted earlier this month, one major bank has employed the utterly insane policy of only offering an increase in rates to customers if they specifically ask for it.
Other banks simply choose to launch a new ‘issue’ of their savings account rather than increase the rates on offer on existing deals, meaning that those who have been with the bank for a while do not benefit from base rate hikes.
Banks are businesses, and obviously need to make some sort of profit, but the reality is that too often they have taken liberties with savers, knowing full well there would be no consequences from doing so.
Will this change anything for savers?
Let’s be clear, savers have been on the sharp end of this rip off for a long time. Honestly, it’s nothing new.
What is new is that these tactics are coming under greater scrutiny.
It is welcome, for example, that MPs are looking into this and giving the big banks a tough time.
The trouble is, ultimately those MPs can’t do anything about it.
Sure, giving evidence to a select committee might be an uncomfortable couple of hours but it doesn’t have to lead to any changes.
That can change when the FCA is involved, however. Banks don’t have to answer to the MPs on the committee, but they do need to answer to the financial regulator.
As a result, this prodding may very well lead to new rules which make it far harder for banks to get away with such shady antics.
That does rely on the regulator stepping up to the plate, though. The reality is that banks have been only too happy to shortchange savers for years, precisely because they don’t fear the consequences.
It’s long been down to savers to be proactive, to shop around regularly in order to grab the best possible return.
Realistically, that is unlikely to change.
But the least we should expect is that our biggest banking names at least offer a respectable return to savers, irrespective of when they became a customer.