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The UK’s four biggest banks have defended themselves against politicians’ accusations that they are profiteering from higher rates, arguing that they have passed through as much as 60 per cent of recent rises to savers.
The Treasury select committee on Tuesday released banks’ responses to its questions over whether they have been too laggardly in passing on the benefits of rate rises to consumers. The correspondence comes as regulators warned banks that data protection rules do not preclude them from alerting customers to better offers.
The Financial Conduct Authority already put bank bosses on notice earlier this month that it expects them to make faster progress on improving savings rates. There are some signs that offers have nudged up since the FCA met with banks on July 6.
The parliamentary committee wrote to the bosses of Lloyds Banking Group, NatWest, HSBC and Barclays earlier this month, citing concerns that they are not offering good value on savings despite rising base rates reaching 5 per cent last month.
In her response, NatWest chief executive Alison Rose said that the bank had passed through over 60 per cent of the impact of higher base rates to its instant access savings accounts in the first half of the year.
“We offer our customers a range of products and rates in what is a very competitive market, and we amend the price of products on an ongoing basis to reflect market conditions and our liquidity needs,” she added.
According to the committee, the four banks offer easy access rates of between 0.9 per cent and 1.75 per cent, below the average of 2.62 per cent from Moneyfacts data.
“If the high street banks continue to pay poor savings rates on their instant access accounts, they should make sure their customers know that better rates are available,” said Harriett Baldwin, the Conservative chair of the committee. “The time for weak excuses is over.”
Other lenders argued that they had told customers when they could move their money into higher value accounts.
“We proactively contact customers to prompt them to consider whether their money is working as hard as it should and encourage them to explore their options with Barclays,” said the bank’s UK chief executive Matt Hammerstein.
In the FCA meeting, banks said that they were unable to tell savers who had opted out of marketing communications about better deals, according to people familiar with the situation.
However, a letter sent by the FCA and the Information Commissioner’s Office on Tuesday to the banking lobby group, UK Finance, disputed that argument.
The watchdogs said that rules around banks’ duty of care to consumers means that lenders can send neutral, factual information on how to move to products on higher rates even to those who have opted out of direct marketing.
“It is more important than ever, with increasing cost of living pressures, for firms to ensure their customers are receiving fair value on their savings,” the regulators said. “We expect that this letter — and existing guidance materials — provides sufficient clarity for firms to support saving customers through their communications.”
The committee also published correspondence with FCA chief executive Nikhil Rathi, who is due to appear in front of them on Wednesday.
He said that due to UK ringfencing rules that separate lenders’ retail and investment banking arms, which impose far higher costs on banks if they pass a £25bn deposit limit, some lenders “may choose to manage deposit rates so as not to breach the threshold”.
The government said last year it would consult on raising the limit to £35bn. Rathi said while this could support competition, it “would need to be balanced against potential financial stability considerations”.
