The Financial Conduct Authority (FCA)has today set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers appropriately, that they’re communicating with customers much more effectively and offering them better savings rate deals.
The FCA found that while interest rates on savings accounts have been rising, this has been happening more slowly for easy access accounts. Nine of the biggest savings providers, on average, only passed through 28% of the base rate rise to their easy access deposits between January 2022 to May 2023. Notice and fixed term deposits have seen greater pass through of rate rises, with these 9 firms passing through 51% over the same period. There has also been significant variance between firms, with smaller firms offering higher interest rates on average than their larger competitors.
Firms offering the lowest savings rates will be required to justify by the end of August how those rates offer fair value, according to the Consumer Duty which enters into force today. If they are unable to do so, the FCA will take action. Firms will also need to step up their communications with their customers about their options and measure the effectiveness of their communications campaigns. Together with the Information Commissioner’s Office, the FCA recently clarified how savings providers could inform their customers about the best available rates, even where they had opted out of marketing.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: ‘We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.
‘We welcome the progress that has been made so far but this needs to speed up. We will be using the Consumer Duty to ensure this is the case – with firms required to prove to us that they are offering their customers fair value.
‘We continue to urge savers to shop around to take advantage of the increasing number of better saving deals available.’
