Watchdog tells nine of the biggest banks, including Barclays, HSBC and Nationwide, to give savers better rates on instant access accounts or face crackdown
- The Financial Conduct Authority (FCA) tells banks to pay better savings rates
- Only 28 percent of Bank of England base rate increases passed through
The city’s watchdog has vowed to “take action” against banks that fail to pass rate hikes on to savers, putting further pressure on the industry.
The Financial Conduct Authority (FCA) has urged nine of Britain’s largest banks and property companies, including Barclays, HSBC and Nationwide, to pay better savings rates on their instant access accounts.
Research by the regulator found that, on average, just 28 per cent of Bank of England base rate increases were passed through by lenders between January last year and May this year.
The FCA said banks with the lowest rates have until the end of this month (August) to justify how their savings products comply with a new consumer tax requiring “fair results” that came into force on Monday.
“If they can’t do it, the FCA will take action,” he added.
The new rules overseen by the UK Financial Conduct Authority aim to prevent scams and unexpected charges.
The measures are part of the FCA’s 14-point plan designed to hold lenders to account.
Banks have come under increasing pressure from Chancellor Jeremy Hunt to pass the benefits of higher interest rates on to savers or make it clear where the best deals can be found.
In an attempt to rein in runaway inflation, interest rates were increased from 0.1 percent in December 2021 to 5 percent last month (July 2023).
The Bank of England is expected to usher in its 14th consecutive rate hike on Thursday.
That could cause interest rates, which are at 5 percent, to rise by 0.25 or 0.5 percent.
But while lenders have increased what they charge borrowers, there has been little increase in what is paid to savers.
It comes after NatWest posted windfall profits on Friday from increasing interest payments on its loans.
The FCA’s plan also includes reviewing the rate at which deposit rates offered by banks change after each Bank of England decision and publishing an analysis of rates on easily accessible accounts every six months.
Sheldon Mills, FCA’s executive director of consumer and competition, said: “We want a competitive cash savings market that offers better deals for savers, where interest rates are revised quickly after base rate changes and companies encourage savers to switch to higher-paying accounts. rates
‘We welcome the progress that has been made so far, but this needs to be accelerated. We will use Consumer Duty to ensure this is the case, and companies will need to show us that they are offering their customers fair value.”
