MPs allege ‘blatant profiteering’ by banks

Members of the Commons Treasury committee have accused high street banks in the UK of failing in their “social duty” to promote saving and instead engaging in “blatant profiteering” by maintaining low interest rates on savings accounts. In a series of letters to the chief executives of the country’s four largest lenders, the committee expressed concerns that these banks have not significantly raised returns on accounts that offer instant access to funds or allow withdrawals, despite the base interest rate reaching 5%.

While the base rate has risen, the largest banks are only offering rates between 0.9% and 1.75% on instant access savings accounts. Meanwhile, they have been increasing charges on loans and mortgages, leading to higher profits. The Treasury committee expressed worries about “customer inertia being exploited” and warned that the banks may face regulatory scrutiny under incoming City regulations, which require firms, including banks, to explain pricing decisions and prioritize customer needs.

The committee members, including Labour MP Angela Eagle, called out the banks’ behavior and emphasized that it is far from the expected standards of treating customers fairly and with respect, as required by the upcoming consumer duty rules. These rules, effective from the end of July, aim to ensure transparency in pricing decisions and demonstrate that firms are acting in good faith.

The committee has challenged the chief executives of NatWest, Lloyds Banking Group, Barclays, and HSBC to justify the low savings rates and show that they are in line with the new regulations. The committee’s chair, Conservative MP Harriett Baldwin, stressed that with rising interest rates and inflation putting pressure on consumers, it is crucial for major high street banks to improve their savings rates to encourage saving.

The bank bosses have until 17 July to respond to the committee’s letters, and the MPs have also contacted Nikhil Rathi, who leads the Financial Conduct Authority (FCA). The FCA has already been questioning firms on their treatment of customers when setting savings rates and is urged to provide examples of banks changing their rates in response to regulatory pressure and clarify the actions it will take against non-compliant banks. The FCA plans to report on the state of the cash savings market by the end of the month.