MPs have accused high street banks of failing in their “social duty” to promote saving and instead engaging in “blatant profiteering” by continuing to offer paltry rates.
Members of the Commons Treasury committee raised their concerns in a fresh round of letters to the chief executives of the UK’s four largest lenders, which the MPs said had failed to substantially raise returns on accounts that do not force customers to lock in cash, limit withdrawals or pay a monthly fee, despite the base interest rate rising to 5%.
The largest banks are offering rates of between 0.9% and 1.75% on instant access accounts. Meanwhile, banks have continued to ratchet up the charges on loans and mortgages on the back of the rising base rate, resulting in higher profits.
The Treasury committee said it was concerned that “customer inertia is being exploited” and that the banks risked falling foul of incoming City regulations that will compel them to explain their decision-making.
One of its members, the Labour MP Angela Eagle, said: “In the middle of a cost of living crisis, the high street banks are squeezing higher profits from their loyal savings customers.
“This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”
MPs are now challenging the big four bank bosses – Alison Rose of NatWest, which is still 38.6% owned by taxpayers, Charlie Nunn of Lloyds Banking Group, Barclays’ CS Venkatakrishnan and HSBC’s Colin Bell – to prove whether low savings rates are in line with incoming regulations.
The consumer duty rules, which come into effect at the end of July, 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 committee’s chair, the Conservative MP Harriett Baldwin, said: “With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK’s biggest banks step up their measly easy access savings rates. The time for action is now.
“The biggest high street banks have a particularly important role to play in encouraging saving. Currently, they are failing on that social duty. We look forward to receiving answers to these important questions in due course.”
Bank bosses have until 17 July to respond to the committee’s letters. The MPs have also written to Nikhil Rathi, who leads the Financial Conduct Authority (FCA). The regulator has said it is already challenging firms over whether they are treating customers fairly when setting savings rates.
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Rathi is being pushed to offer examples of banks changing their rates as a result of FCA pressure and to explain how the regulator will judge and measure banks’ efforts. The regulator is also being urged to confirm what kind of action it will take against banks that fail to comply with new rules.
The FCA said it would report on the state of the cash savings market by the end of the month and it was already pushing banks to explain the pace and extent of changes to their savings rates. “We’ll respond to the committee’s letter in due course,” it said.
HSBC said it had increased savings rates “more than a dozen times” since the start of 2022, and that its range of accounts offered customers choice on how to manage their money “with competitive returns”.
Barclays said it regularly reviewed its savings product rates. NatWest and Lloyds were also contacted for comment.
