The Treasury Committee had written to Barclays, HSBC, Lloyds and NatWest as part of its inquiry into retail banks, asking them about savings rates. As a result of the responses it has now written to the FCA. The Committee had wanted to understand how the banks decide what proportion of interest rate rises they pass onto their savings customers, and whether chief executive remuneration is linked to profits from their savings business. At the time it wrote the letters, the four banks all offered less than 1% for their easy access savings accounts, but HSBC and NatWest have since increased their rates.
The banks outlined in their letters that generally around 20% of their easy access accounts had over £5,000 in them.
The Committee has now written to FCA asking what it is doing to ensure effective competition for savings and mortgage products and that banks are not relying on customer inertia to allow savings rates to rise more slowly than mortgage interest rates. It notes the existence of loyalty penalties for existing savers, queries whether FCA would expect greater competition in the mortgage markets since the majority of borrowers remortgage with their existing provider. Other questions include what additional forbearance measures FCA thinks are necessary in response to the cost of living crisis and the effect it thinks the Consumer Duty will have on how financial institutions sell and price their mortgage and savings products. The Committee has asked FCA for a reply by 12 April.