Consumer duty will protect loyal customers, says FCA

The regulator expressed this opinion to the Treasury Committee in correspondence published today (20 April).

Following increases in high street banks’ net interest margins, last month the Committee asked what analysis the financial regulator had conducted on whether banks were earning disproportionate profits by increasing rates on mortgages far quicker than on savings products.

The cross-party Committee of MPs also asked what work the FCA had conducted to ensure the UK’s savings market is competitive.

In response, the regulator points to its upcoming consumer duty as a solution to this issue, stating it will require a cultural change in some firms, and outlines it has challenged firms that had made “relatively small increases” and where there was a “material time lag” to pass through the increase in rates.

The Committee has been questioning how the top four retail banks determine what proportion of interest rate rises to pass on to their savings customers. Responses from Barclays UK, HSBC UK, Lloyds Banking Group and NatWest Group can be read in full here.

Commenting on the correspondence, Harriett Baldwin MP, Chair of the Treasury Committee, 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. While it’s welcome to hear the financial regulator is monitoring this situation, we will be keeping a close eye to ensure they act on these assurances. Consumers should continue to shop around to get the best rates possible.

“With banks set to release their first quarter results in the coming weeks, we will be monitoring whether firms are continuing to squeeze profits from their loyal savings customers.