Banks are in the firing line for low savings rates once again after the big four lenders received another letter from the influential Treasury Committee.
Writing to the UK heads of the big four banks, Harriet Baldwin – chair of the Treasury Committee – said the Committee was “concerned that banks’ savings rates remain too low, particularly in instant access savings accounts.”
She highlighted that the Bank of England’s base rate has now reached five per cent while the big four banks – HSBC, Barclays, Lloyds and Natwest – offer rates between 0.9 per cent and 1.75 per cent.
Commenting on the letters, 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,” she continued.
Baldwin pointed out that the incoming Consumer Duty, which comes into force at the end of this month, will ask firms to “explain and justify their pricing decisions”, including on savings rates. The regulator will assess whether the products offer ‘fair value’ to consumers.
The banks were asked how the Consumer Duty will change pricing decisions and whether existing offers are consistent with the new regulation. They were also asked whether existing customers have been given competitive rates in line with base rate changes.
Angela Eagle, member of the Treasury Committee, commented: “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.”
The Committee wrote to the Financial Conduct Authority (FCA) as well, asking how it would measure ‘fair value’ in pricing decisions.
The watchdog was asked whether a bank has changed its rates as a result of its intervention and what enforcement action is available if the rates are not in line with the Consumer Duty.
The letter is the latest in the Treasury Committee’s campaign against the perceived low savings rates offered by banks. More and more politicians have weighed in on the subject, with Chancellor Jeremy Hunt saying the government was working on a “solution” to the issue.
However, lenders have argued that easy access accounts are not the right place to focus and have repeatedly pointed out that higher rates are available on other savings products, which involve locking up funds for a longer period of time.
A Barclays spokesperson said, “We continue to remain committed to providing our customers with a range of options to help them save for their goals and regularly review our savings product rates.”
Natwest declined to comment. Lloyds and HSBC were contacted for comment.