UK bank bosses have been summoned to a meeting with the financial watchdog this week amid mounting concerns that they are profiting from rising interest rates by offering paltry savings rates to customers.
Executives from the big high street names Lloyds Banking Group, NatWest, HSBC and Barclays, as well as from smaller lenders, are due to attend a meeting at the Financial Conduct Authority (FCA) on Thursday to discuss concerns that savings rates are lagging far behind the soaring costs of mortgages and loans.
The Bank of England has raised its base rate to 5% and further increases are expected. The move has pushed the average rate of a two-year fixed mortgage to 6.47%, according to Moneyfacts, while the average rate on an easy access savings account is 2.45%.
The FCA summoned bosses as part of its investigation into the savings market, which will result in a report later this month. The regulator’s executive director of consumer and competition, Sheldon Mills, who will lead the meeting, also hopes it will focus minds before the FCA’s new consumer duty regulations come into force at the end of July, the Guardian understands.
The new rules will require all City firms including banks to explain pricing decisions, including how quickly they raise savings rates, and show they are acting in good faith and prioritising customer needs.
The meeting, which was organised nearly two weeks ago, will take place days after MPs on the Commons Treasury committee accused high street banks of “profiteering” and failing in their “social duty” to promote saving, resulting in a fresh round of letters to the chief executives of the UK’s four largest lenders.
The committee’s chair, the Conservative MP Harriett Baldwin, described the savings rates being offered by banks as “measly”.
Speaking on BBC Radio 4’s Today programme, Baldwin said: “All year, we’ve been putting pressure on the banks … because it’s been very evident that on the day the Bank of England hikes rates, which they need to do to tackle inflation, people get a call from their mortgage provider saying your rate is going up, if they’re variable. But savings rates have languished.”
The committee has flagged its concerns to the regulator after hauling bank bosses in for questioning in March.
“We’re quite sure that these rates are measly and that the banks are not treating our constituents fairly,” Baldwin said. “We’re particularly concerned about some of our older constituents who have savings, who are unable to use internet banking and find it difficult to switch.” She said this was a particular concern and she expected the regulator to focus on this.
Cost of living concerns recently led banks to sign a “mortgage charter” orchestrated by the Treasury and led by the chancellor, Jeremy Hunt. The agreement with high street lenders offers struggling homeowners forbearance measures such as a 12-month grace period before a home is repossessed.
It is not clear whether a similar savings charter could follow. A source with knowledge of the FCA’s meeting said the goal had not been decided.
According to the consumer champion Martin Lewis’s website Moneysavingexpert, the top rate for an easy access savings account is Yorkshire Building Society’s 4.25%.
