Lawmakers in the UK have levied fresh criticism against banks in the country over the savings rates they offer to customers.

The Treasury Select Committee, an influential body which examines the expenditure, administration and policy of HM Treasury, HM Revenue & Customs, and associated public bodies, including the Bank of England and the Financial Conduct Authority (FCA), said on Monday that it had written to the country’s ‘Big Four’ banks – Barclays, HSBC, Lloyds and Natwest over their handling of savings rates.

In the letters addressed to the chief executives of each bank, the committee says that it is "concerned that banks' savings rates remain too low, particularly in instant access savings accounts”. The committee notes that savings rates are not rising in line with the base rate of interest that recently reached five per cent, while also highlighting strong profits at the big four during the first quarter of 2023.

The letters ask multiple questions of the banks' top decision maker, including whether existing customers have been given competitive rates to those given to new customers and asking them to ‘persuade’ the body that their savings rates provide fair value and do not exploit customer inertia.

The letters have been sent less than a month before the implementation of the FCA's consumer duty which “will set the expectation that firms should be able to explain and justify their pricing decisions. This includes how quickly they raise savings rates and being able to demonstrate that rates offer fair value.”

The banks have also been asked whether they are confident that their present policies and products offered to existing customers relative to new customers are consistent with the consumer duty.

The committee has also written to the FCA, asking the market regulator whether banks had responded to the additional pressures applied upon them and what enforcement action could be taken under the consumer duty. Specifically, the committee asks the FCA for examples of banks changing rates as a result of challenges from the watchdog, how it will be able to judge what is fair value, and what enforcement action is available to the FCA if firms do not set rates at fair value in line with the consumer duty.

Commenting on the correspondence, Harriett Baldwin MP, chair of the Treasury Committee, said: “With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK’s biggest banks step up their measly easy access savings rates. The time for action is now.

“The biggest high street banks have a particularly important role to play in encouraging saving. Currently, they are failing on that social duty. We look forward to receiving answers to these important questions in due course.”

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