The FCA has held what it summarised as a constructive meeting today with the UK’s largest banks and building societies. On the agenda: delays in savers benefitting from the rising interest rate environment.
The meeting builds on work the FCA has undertaken to monitor the savings markets and the decisions made. It is also timely, given the impending implementation of the FCA’s new Consumer Duty regulation. That comes into effect on 31 July.
The FCA has reported that only two-thirds of impacted firms are on target to be fully compliant on time.
In a statement, the FCA said: “Through preparation for our new Consumer Duty, which requires the firms we regulate to put consumer interests at their heart, we have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products.
Banks recognise need to do more: FCA
“We now want to see that progress accelerate. We are also increasingly seeing customers switching their savings products to those with higher rates. We continue to urge savers to shop around to make sure they’re getting the best deal.
“We want to see a competitive market with fair value retail banking products. And with banks helping consumers to access them. We discussed how our consumer duty will set a new standard for firms from the end of July, including on savings rates. We set out that expectation to bank and building society leaders in today’s meeting.
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“They 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.
We have previously committed to reporting at the end of the month on how the savings market is supporting savers to benefit from higher interest rates. We will set out then whether further steps are needed.”
FCA cracks down on savers interest rate rise delays – industry reaction
Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company
“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
“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
“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.”