MSE News: Watchdog mulls probe into stingy savings accounts 8 July 2014 at 5:41PM in Budgeting & bank accounts 13 replies 2K views

Former_MSE_Paloma

Banks that pay ultra-low interest rates on savings accounts because customers don't switch may face a crackdown...

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Watchdog mulls probe into stingy savings accounts




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Herbalus

What's the FCA (potentially) going to do as an intervention?

It can't exactly impose a minimum interest rate.

Archi_Bald

Apparently the FCA are on some sort of a high after the current account switching service has been declared a resounding success as apparently 14% more accounts were switched from October 13 to March 14, compared with the previous year.

I don't know whether they know how many of these switches are attributable to bonus tarts, but I suspect that number is very high, and the figures are therefore most probably distorted and quite meaningless. My own switch rate has increased 200% since I switched none in 2013 and 2 in 2014. Alas, there were only 2 joining bonuses I qualified for, else my switcher rate increase would have been even higher. It has now gone back to zero and will stay there until there's another joining bonus I qualify for.

The FCA could make all sorts of decisions regarding savings - such as:

• Must tell customer what bank's best rate is / must tell customer what the best rate in the market is (similar to what utilities must now do with tariffs).
• Must provide a 7-day bank-to-bank switch service.
• Must allow transfers in on all cash ISAs.
• Must make cash ISA transfer easier (apparently Which? think it is too complicated......)
• Must not provide bonus rates (that seems to still be a favourite of some pundits although sensible people like Martin Lewis have campaigned against this).
• Must not offer accounts with rates less than BoE minus 0.x%
• Must not offer current accounts with higher interest rate than at least one savings account on offer

Or anything else that will cost the banks a lot of money to implement. So there is a huge danger that the bottom line result will be middle-of-the-road savings rates for everyone, and that all savvy savers will lose out, as banks will hardly reduce their dividends to pay for the extra admin that any FCA ruling would no doubt entail. The smaller Building Societies will absolutely love (not) any additional compulsory admin.

The FCA also seem to be completely ignoring the fact that banks don't actually need savers' money as long as we still have FFL and QE. Put the screws on the banks and BSs, and they'll just not offer any savings accounts at all, or lower the max amounts they will allow in the accounts they do offer.

NB. Should this thread by over on the Savings and Investments board?

Consumerist

Archi_Bald wrote: »

. . . My own switch rate has increased 200% since I switched none in 2013 and 2 in 2014. . .

Isn't that an infinite percentage increase?

Archi_Bald

Consumerist wrote: »

Isn't that an infinite percentage increase?

LOL, yes, mathematically you are absolutely right, and I was debating infinite vs 200% as I wrote my post. But then I thought 200% is more meaningful to many readers.......

vouch0r

Archi_Bald wrote: »

The FCA also seem to be completely ignoring the fact that banks don't actually need savers' money as long as we still have FFL and QE.

what is FFL and QE?

Jogle

vouch0r wrote: »

what is FFL and QE?

Funding For Lending & Quantitative Easing

Consumerist

Archi_Bald wrote: »

LOL, yes, mathematically you are absolutely right, and I was debating infinite vs 200% as I wrote my post. But then I thought 200% is more meaningful to many readers.......

That sounds rather similar to the banks explaining that daily overdraft charges are simpler for their customers to understand.

I do, however, agree in principle with the rest of your points.

Archi_Bald

Consumerist wrote: »

That sounds rather similar to the banks explaining that daily overdraft charges are simpler for their customers to understand.

Guilty as charged, and I do apologise if I insulted anyone by using populist expressions. I will stick to proper numbers from now on.

Archi_Bald

vouch0r wrote: »

what is FFL and QE?

FFL = Funding For Lending, Treasury giving cheap money to financial institutions so they can provide businesses with affordable loans.
http://www.bankofengland.co.uk/markets/Pages/FLS/default.aspx

QE = Quantiative Easing, figuratively speaking that is printing (temporary?) money when you have run out of money. Helps to keep interest rates low
http://www.bbc.co.uk/news/business-15198789

jimjames

Archi_Bald wrote: »

NB. Should this thread by over on the Savings and Investments board?

I saw the news story and wondered why there was no discussion of it - now realised why!

Bizarre that it's in bank accounts section not savings board. Maybe because current accounts pay more interest than savings accounts or ISAs?