Regulator warns UK banks over miserly savings rates for loyal customers

theguardian.com:

The “harm” caused to millions of loyal customers of high street banks who are earning low interest on their savings is likely to have worsened as interest rates have risen, according to the UK’s chief financial regulator.

The Financial Conduct Authority said it had challenged some banks that had been miserly with their savings rate increases and warned “onerous interventions” would be considered if it concluded its concerns were not being properly addressed.

The official Bank of England base rate is 4.25% after 11 increases in a row, yet the interest offered by some widely held savings accounts are lagging way behind.

In February, MPs on the Treasury committee questioned bosses of the four largest UK banks – Barclays, HSBC, Lloyds and NatWest – about this, and on Thursday the committee’s chair, Harriett Baldwin, said: “The regulator has now given us official confirmation that the UK’s biggest banks are profiting from interest rate rises and that loyal savers are being increasingly harmed.”

Much of the focus has been on instant access accounts. The Barclays Everyday Saver offers only 0.65% interest and Santander Everyday Saver pays 0.7%. Lloyds’ Easy Saver is offering only 0.65% unless a saver has £25,000 or more stashed away.

There are other accounts paying even less: Virgin Money’s Everyday Saver offers just 0.25%.

Last month, MPs on the Treasury committee said: “It is difficult to avoid the conclusion that our biggest banks are taking advantage of their most loyal customers to increase profits and CEO pay.”

In a letter to the committee, the FCA’s chief executive, Nikhil Rathi, said it was standard practice for financial firms to offer better interest to new savers while leaving existing customers on less competitive rates.

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