According to the financial regulator, depositors suffered “damage” because banks did not refuse to raise rates.
The Financial Conduct Authority (FCA) added that it is challenging banks that have been tough on raising savings rates, warning that “action” will be taken if they ignore the regulator’s concerns or act slowly.
FCA CEO Nikhil Rati told members of the Treasury Select Committee that it was “standard practice” for banks to offer new savers better rates while existing savers were earning less at the older rates.
The base rate of the Bank of England is 4.25 percent, but the rates that banks offer on some savings accounts are much lower. Mr. Rati said the rates offered by the companies are a commercial choice.
“We think the damage from this practice (and the loyalty penalty for repeat customers) has increased as the base rate has risen,” he said.
Due to take effect in July, the new customer obligation will ensure banks and other financial firms improve their services by putting consumers at the center of their business, Mr. Rati said.
He added: “We have made it clear that companies need to be able to justify and explain the reason for the speed and extent to which they make changes to their various savings rates.”
The FCA tracks the speed and extent of companies’ “shift” into their savings after the Bank of England’s interest rate hike.
“We questioned some of the outliers and asked for more information from companies that saw relatively modest growth in floating rate savings products in 2022 and where we saw a significant slowdown in the pass-through of savings to savings compared to mortgages,” added Mr. Rati. .
The committee is investigating how large retail banks determine how much of the rate hike they pass on to their savings customers.
Commission President Harriett Baldwin said: “Regulators have officially confirmed that the UK’s biggest banks are benefiting from rate hikes and that loyal depositors are increasingly being punished.
“While there have been rumors that the financial regulator is watching this, we will be watching closely to see if they honor these guarantees.
“Consumers should keep looking for better prices,” she added. “As banks release their first-quarter results in the coming weeks, we’ll be watching to see if companies continue to squeeze profits out of their loyal savings customers.”
Source: I News
I am Moises Cosgrove and I work for a news website as an author. I specialize in the market section, writing stories about the latest developments in the world of finance and economics. My articles are read by people from all walks of life, from investors to analysts, to everyday citizens looking for insight into how news will affect their finances.