The City watchdog has delivered a damning indictment of Britain's banking sector, revealing a systemic failure to offer fair savings rates to customers, particularly those most vulnerable.
In a hard-hitting review, the Financial Conduct Authority (FCA) found that while the Bank of England's base rate soared to a 15-year high, many high-street banks were painfully slow to pass these benefits on to savers, if they did so at all. The report highlights a stark imbalance where mortgage rates rose with alarming speed, while savings rates languished.
Who is Being Hit Hardest?
The FCA's investigation pinpointed that the burden of this injustice is not shared equally. The most concerning finding is that older customers and those with lower financial literacy are disproportionately affected. These groups are more likely to hold their savings in outdated, low-interest accounts and are less likely to switch to better deals.
Sheldon Mills, the Executive Director of Consumers and Competition at the FCA, did not mince his words: "We want to see firms acting quickly and positively to help their customers move to better savings products. Where we don't see progress, we will act."
The 'Loyalty Penalty' in Action
This situation is a classic case of the 'loyalty penalty', where long-standing customers are effectively punished for not shopping around. The FCA reported that a staggering £150 billion of savers' cash is sitting in accounts paying 1% interest or less, a paltry sum in the current high-inflation environment.
What Happens Next?
The regulator has given the banking industry an ultimatum. By the end of February 2024, banks must:
- Demonstrate how their savings rates offer fair value.
- Accelerate the pace at which they pass on interest rate rises.
- Proactively engage with customers to help them switch to higher-yielding accounts.
The FCA has made it clear that this is not a voluntary suggestion. Firms failing to meet these expectations will face tough supervisory action and potential financial penalties.
For millions of Britons, this report is a wake-up call to check their savings accounts immediately. While the watchdog is turning up the heat on banks, consumers are urged to take matters into their own hands and seek out the best possible rates for their hard-earned money.
