Regulator warns UK banks over miserly savings rates for loyal customers

gelato_cat

From today's Guardian:

"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."

https://www.theguardian.com/money/2023/apr/20/regulator-warns-uk-banks-miserly-savings-rates-interest-loyal-customers

grumbler

The regulator has previously looked into the idea of a “single easy access rate” across all UK instant access savings accounts, and Rathi said the FCA was open to revisiting this

This controversial bit (and not only it) was already discussed in the  The Top Easy Access Savings Discussion Area

grumbler said:

mebu60 said:

ForumUser7 said:

This may be of interest to some:

The Chief Executive of the FCA has apparently said they remain open to revisiting the idea of a single easy-access rate, among other interventions, if it continues to see savers being penalised for loyalty:

https://www.thisismoney.co.uk/money/saving/article-11994691/Banks-FORCED-pay-savers-new-rules.html

This seems really odd to me - maybe a minimum easy access rate, but a single easy-access rate feels unlikely to benefit us forumites if all of a sudden, everyone had to pay the same rate. I imagine it'd be lower than some of the top Easy Access Rates just now.

*This is a daily mail subsidiary article*

EDIT: https://www.fca.org.uk/publications/consultation-papers/cp20-1-introducing-single-easy-access-rate-cash-savings

https://www.fca.org.uk/publication/consultation/cp20-01.pdf

https://www.fca.org.uk/news/press-releases/fca-acts-help-customers-get-better-rates-cash-savings

Single EA rate hardly promotes competition! 

Is also in The Guardian:
Regulator warns UK banks over miserly savings rates for loyal customers | Savings rates | The Guardian

Penultimate para:
The regulator has previously looked into the idea of a “single easy access rate” across all UK instant access savings accounts, and Rathi said the FCA was open to revisiting this “or considering other more onerous interventions” if it later concluded the potential ‘loyalty penalty’ harms it identified had “not been adequately mitigated”.

I think "across all UK instant access savings accounts" is either simply incorrect or some abandoned crazy idea.
In fact they want the same rate within the same financial institution for new and 'loyal' customers - similarly to car insurance prices.

We propose to allow firms to introduce a maximum of two SEARs for each of their brands: one for easy-access cash savings products, and one for easy access cash ISA products.

shortseller09

Suzey said:

From today's Guardian:

"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.

Yeah right, from the FCA who are only marginally less toothless than the United Nations.

masonic

Great, low rates for everyone because of those who don't care enough to ditch and switch.

DullGreyGuy

shortseller09 said:

Suzey said:

From today's Guardian:

"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.

Yeah right, from the FCA who are only marginally less toothless than the United Nations.

How?

Havent noticed that loyalty taxes for car & home insurance have gone?

If they decided to set a UK wide interest rate for savings they'd achieve that, given that doesn't create competitive tension then its unlikely to be adopted but requiring a single rate for all customers with the same access level is more realistic. Just like the FCA rules on insurance they will undoubtably acknowledge that this will benefit certain customer segments more and that those who proactively manage their savings will be worse off (as they did for insurance)

TheBanker

I'm not sure what the FCA are suggesting.

I think the practice of taking old accounts off sale and offering an identical product, with a slightly different name and higher interest rate to new customers, is unfair. If they are suggesting banning this practice, then fair enough. We might see the introduction of something similar to switcher cashback for savings accounts as a mechanism for banks to try to win new customers, if they can't offer short term 'bonus' rates.

But there are sometimes legitimate reasons why banks will offer different rates on similar products. As an example, my savings are in an e-saver account which I can only access online. My bank offer a similar account which comes with a cash card and can be accessed through their branches. The branch based account pays a lower rate. This is not unfair; those customers have access to additional services which have a cost to provide. What would be unfair is the bank preventing them from moving to the e-saver if they were prepared to give up their ATM and branch access. 

Anyone on MSE will know that generally leaving your savings in an account at a high-street bank is not going to generate the best return. Some people still do that because they like the comfort of having branch access (although I appreciate this is becoming more difficult in some areas). Some are not bothered about earning interest and think having everything in one place makes for an easy life. Some people cannot earn interest for religious reasons so it's irrelevant to them. Some people may wish to save with a Building Society rather than a bank for ideological reasons. The point is there is a wide range of accounts on offer, and customers should choose those that best meet their needs.

One of the FCA's objectives is to promote competition, and interfering in pricing decisions doesn't do that. I think the savings market is quite competitive - but to benefit customers have to be willing to adapt and move to institutions that only exist in the digital world. These institutions can offer better rates because their costs are far lower, but the customer 'pays' for that in terms of not having branch access, not receiving paper statements etc.

Can you imagine what would happen if a regulator said shops can't charge more than 90p for a 2 pint bottle of milk? Small local shops might stop selling milk, or close down, because they can no longer profit. That would be of no benefit to the people who use those shops.

metrobus

The banks have become a cartel, helped by the BoE who have handed them billions in QE.

MX5huggy

The milk 🥛 comparison is interesting because its a competitive market, but the supermarkets don’t separate customers into loyal ones get one price and switchers get another. Because some people choose to engage in the milk market and would go to the shop with the cheapest 4 pints we all benefit from the competition. I don’t choose where to shop based on the price of Milk. 

These markets where the price is different for existing customers and new customers need some regulation, banking, broadband, insurance, energy. 

george4064

masonic said:

Great, low rates for everyone because of those who don't care enough to ditch and switch.

Exactly my initial thoughts too

BooJewels

Is this not about the basic savings accounts that banks allow you to open alongside your current accounts?  I read the article and what I took from it was that it's these accounts that need to be competitive.  High street bank accounts of this nature seem to offer interest rates well under 1% and the call was for these to be brought in line with other savings vehicles elsewhere - as loyal (probably elderly, if family members I've recently been executor for are any guide) customers were opening these accounts without necessarily realising they're so pathetic and they could do so much better elsewhere.

I have several of these accounts and have had them for many years, but do so for mainly 2 reasons - to keep money out of my current account until I actually need it, for security and to organise my funds into pots for specific purposes (a largely redundant need now).  So any increase to something realistic on these would be a real bonus for me.

Brie

masonic said:

Great, low rates for everyone because of those who don't care enough to ditch and switch.

Not everyone can switch their accounts.  So get stuck with low rates.  In my case if my account is overdrawn I have to pay nearly 7% interest, if it's in credit I get .25%.  Switching from this to another account isn't currently an option as this is actually my mortgage.