Banks slammed for not passing on rate hikes

Chris Dorrell

UK BANKS have been accused of “taking advantage” of customers by failing to pass on higher interest rates to savers, while upping executive pay.

Britain’s banks have seen their income boosted by the Bank of England’s attempt to stave off inflation with a succession of ten straight interest rate hikes. The base rate now stands at four per cent – the highest since the financial crisis.

However, in a letter to the heads of four of the UK’s largest banks, chair of the Treasury Committee Harriet Baldwin yesterday asked banks why their savings rates remain lower than the Bank of England’s base rate.

The interest rate on HSBC’s ‘flexible saver’ account is the highest at 0.9 per cent. Natwest’s ‘flexible saver’ pays 0.65 per cent as does Lloyds’ ‘easy saver’ account. Barclays’ ‘everyday saver’ pays the least at 0.55 per cent.

Baldwin said constituents may “reasonably surmise” that banks have “taken the opportunity of a rising bank rate and a reluctance of customers to switch to increase net margins and profits.”

The letter follows up on a Treasury

Committee hearing last month in which MPs accused banks of being “ungenerous” on their savings rate, an accusation which the bank bosses rejected.

Since then the UK’s largest lenders have reported their profit for the final quarter of the year, with Natwest, Lloyds and HSBC recording big increases on last year.

Baldwin also drew attention to the high level of executive pay at the banks, confirmed in last month’s results. Natwest CEO Alison Rose saw her pay increase 46 per cent on last year, while HSBC’s Noel Quinn recorded a 14 per cent increase.

“It is difficult to avoid the conclusion that our biggest banks are taking advantage of their most loyal customers to increase profits and CEO pay,” Baldwin said.

It came as Skipton Group yesterday criticised rival high street lenders for failing to pass on higher interest rates to savers.

“We’ve followed the interest rates up on our savings range whereas… the market practice has been for people to maybe leave the savings rates down, which then supports the margins and the profits of the institutions who could make more profit,” Stuart Haire, Skipton Group’s chief executive, told City A.M. “Shame on them,” he said.