Since it replaced the Financial Services Authority, the Financial Conduct Authority (FCA) has been unashamedly bring banks and financial institutions to account.
In acting to uphold financial laws and regulations, and to work in the best interests of banking customers, the FCA has publicly named and condemned some banks and banking practices, and imposed record fines.
The end of 2015 saw the FCA raising awareness of savings as the regulator revealed those banks, building societies and financial institutions that paid as little as 0.01% on savings accounts. According to the financial watchdog, 32 banks paid poor rates of interest on savings accounts held by long term customers. A total of £160bn of savings were earning no more than 0.5%, the Bank of England base rate.
The FCA named High Street banks like HSBC and First Direct (both paying 0.05% on savings) in its list, with Santander and Yorkshire Bank only paying only slightly better at 0.1%. Amongst the worst banks for savings rates highlighted were Danske Bank, Ulster Bank and Progressive Building Society, all of them paying only 0.01% interest, in common with some other banks also named.
The financial regulator wants to bring more openness and transparency to savings – and ultimately more consumer choice and information. The regulator is planning to introduce measures to encourage customers to compare and move savings accounts easily, and to re-establish effective competition in the savings market. With that in mind, one such measure is a new rule that will force banks and building societies to offer prompt and efficient switching services to better savings accounts that they operate. Further, from January 2017, a seven working days savings switching service for cash ISA transfers will be launched.
December’s list was also but the beginning of a trial for the regulator; the FCA intends to publish information about such low interest savings accounts every six months as part of an 18-month trial. The FCA hopes the regular published information would encourage banks and building societies to “change their behaviour and offer better value” accounts and services for savers.
In its criticism of banks and savings accounts, the FCA stopped short of actually banning high introductory bonus rates to attract customers. It believes that such tempting high rates may actually benefit some customers – but despite that, the financial watchdog expects savings providers to improve the way that they communicate to customers about interest rate changes, and when that introductory bonus rate has expired. Additionally, it wants banks and building societies to take out complex financial jargon, and to give customers key information that to help compare different savings accounts, by providing summary boxes and an easy to understand format. Similarly, savings accounts summaries will have to display interest rate information prominently alongside account balance information in any and all interest rate related customer communications.
Further evidence for implementing the changes and for working to assist savings customers was given in the January report and proposals by the fact that many customers actually found it difficult to know what interest rate they were on. Similarly, many were put off switching savings accounts by the presumed inconvenience, with 80% of easy-access savings accounts not having been switched in the last three years.
With many financial advisers and commentators always advocating savings – now the FCA is shining the spotlight on just that area of personal banking. Amidst a turbulent global economy, savings are always highly advised – even if it is just a little bit regularly.
However, it is important that consumers choose the right savings account or service for their personal finances. Bringing more openness and transparency to that process is just part of what the FCA is hoping to achieve regarding issues with banks and savings accounts.
The FCA List of Poor Performing Savings Accounts (December 2015)
• Barclays – 0.25% for accounts still open to new customers, 0.1% for accounts closed to new customers.
• NatWest and Royal Bank of Scotland – 0.5% for accounts still open to new customers.
• Lloyds Banking Group – 0.5% for open accounts, 0.1% for closed accounts.
• Nationwide – 0.5% for open accounts, 0.25% for closed accounts.
• Santander – 0.1% for open accounts, 0.1% for closed accounts.
• Ulster Bank (owned by RBS) – 0.01% for open accounts, 0.01% for closed accounts.
• Co-operative Bank – 0.25% for open accounts, 0.06% for closed accounts.
• Virgin Money – 1.01% for open accounts, 0.1% for closed accounts.
• Danske Bank – 0.01% for open accounts, 0.1% for closed accounts.
• ICICI Bank UK – 1.4% for open accounts