MAGGIE PAGANO: Name and shame banks that don’t play fair on rates

Oh, to be a fly on the wall today at the Financial Conduct Authority (FCA) headquarters in Stratford.

Britain’s top bank chiefs have been summoned over claims they are ‘profiting’ by failing to pass on recent interest rate hikes to depositors.

Chief executives and directors of Barclays, HSBC, NatWest, Lloyds and other lenders will be questioned by Sheldon Mills, the consumer and competition regulator’s executive director, about how they value cash savings accounts.

The core of the FCA’s investigation will be whether the banks offer “real value” to customers, but also how they communicate these deals to them.

The emergency meeting was prompted by concerns that although the Bank of England has now raised interest rates 13 times from 0.1% to 5% in the past 18 months, these rate hikes have not been passed on to most savers.

According to Moneyfacts, the typical rate on an easy-to-access savings account is just 2.43 percent, while the average two-year fixed mortgage is 6.42 percent.

Talk about double standards! Yet there are also countless pounds on deposit that do not earn interest.

AJ Bell analyst Laith Khalaf points out that savings figures for May on the bank’s website show that just under £250bn in money has been deposited with UK clearing banks in non-interest bearing household accounts.

While this is lower than a peak of £270 billion at the height of the lockdown in 2022, when few of us spent money, it is much higher than it has been since the financial crisis, when interest rates were significantly lower.

Surprisingly, perhaps, but it’s also much higher than before the 2008 financial crisis, when interest rates were about the same as they are today.

It may very well be that this large sum is not attracting interest, not the fault of the banks, but because savers have not sought accounts that bear interest, either through apathy or lack of interest.

What the FCA will look at is this much larger quantum: the UK’s total interest-bearing ‘visible’ deposits, which stood at £944bn in May.

The regulators will be most concerned about the interest rates paid on this £1 trillion in savings to discover if the banks are indeed ‘profiting’. What can the FCA do to force the banks to pay higher rates?

As such, it is not the watchdog’s job to be a price regulator and so it has no formal recourse against the banks, or penalties to hand out, if they fail to pass on the rate hikes.

But it led the way over the past year by being more assertive with the banks and demanding proof that they do indeed provide real value to customers.

Something is working – over 100 lenders were persuaded by the FCA to cough up £47 million for 195,000 customers who were in financial difficulty.

It’s also proposing permanent requirements to support troubled borrowers, which is all good stuff.

Publicly shaming banks that fail to pay the going rate after today’s meeting could also work.

Something to think about

After confirmed Sainsbury’s food prices fall, there is good news from AO World that inflationary pressures are easing, citing lower shipping costs and supply chains returning to normal levels.

And AO should know because, as founder John Roberts says, the Internet is as price transparent as it gets.

There was also better news from the UK Chambers of Commerce’s quarterly economic survey, which shows that less than half of companies surveyed plan to raise prices as cost pressures ease.

Wages, rather than energy, are now the main concern.

But at least there’s a glimmer of sunlight.

Track fails

Jacqueline Starr of the Rail Delivery Group explains that hundreds of ticket offices are being closed because only 12 percent of tickets are bought from them.

This is unfair at best, a case of chicken and egg.

What she doesn’t say is that we are forced to buy tickets from vending machines because so many offices are often closed.

The handling of machines, which always seem to be directly in the sun, is difficult for the elderly and disabled.

Start writing letters – the public has 21 days to protest.