Banks will be forced to pay investors a minimum interest rate after regulators found that the old customers instant access accounts are paid ridiculous prices due to their apathy about switching providers.
The office of financial regulation and said that the new basic savings rate will be used to increase the yield for investors because it recognized that previous attempts to increase competition between banks has failed to improve the situation for consumers.
Minimum interest rate on instant access, and easy account, the investor could cost banks around £300m, the FCA said, and can cause them to need to cut a small amount of some of the best “teaser” introductory rates on accounts.
The proposals follow persistent concerns that investors are lured initially high level and then is used as a bet in the accounts is cut in subsequent years.
Christopher Woolard, Executive Director of strategy and competition at the FCA, said: “operators can take advantage of the high-level omissions of the client to pay lower interest rates to loyal customers. While many customers have valid reasons for not shopping around, providers still need to treat them fairly, while maintaining competitive prices for those who.
“Efforts to encourage customers to switch had a limited impact and we continue to be concerned about how firms relate to customers. That is why we consider the introduction of a baseline level of saving for old accounts that will facilitate competition and help you better interest rates.”
Hundreds of billions of pounds sitting in low-interest Deposit accounts are the most important source of profits for large banks, allowing them to Finance lending and makes it more difficult for banks Challenger to enter the market.
Ark said about £354bn passed in close proximity to cash savings accounts in the UK and over £100 billion in immediate proximity to cash ISAS.
Flexible account Bank HSBC pays 0.05% per annum, while the instant release nationwide access 6 accounts pays 0.1%.
Investors hoping for a major boost to their interest rates will be disappointed. The FCA conducted simulation based on the high street Bank interest rates in 2013 and found that if he applies a basic level of savings, the interest on old accounts increase of 0.084%.
Comparison of savings champion savings, the website says a typical interest rate high street Bank pays for instant style at present, access is open to the public is 0.23%.
Banks gave the proposals a cool reception TSF. Peter Tyler of Finance of great Britain, which represents the major banks, said: “the industry has implemented a number of remedies to increase competition in the cash savings market, helping investors to shop around and find the best deals.
“These include communicating more clearly with clients about rates, which they get faster transfers funds ISA and extended support invitation, before the rate is reduced”.
The FCA acknowledged that the main obstacle for consumers more rates was apathy. His study showed that 33% of investors who had considered switching accounts, not to do so because the perceived or actual gain will be too low.
Discussion paper, Joan of ARC said, “42% found very little difference in interest rates offered on the market, and 28% said that their balances were not high enough to obtain from transition … it’s a sign that the market is not working.
“Pay less interest rates for regular customers is a long-term pricing strategy adopted by firms in the UK and internationally. We believe that this is unlikely to change without further interference.”
The Finance Committee on Thursday will call for the abolition of tax relief on ISAS. He says there is little evidence that tax relief encourages vulnerable families to keep. Instead, it will cause additional cash bonuses and direct mapping schemes such as help to save.
He also said the government should abolish the entire life of Jesus, whom he criticizes for “complexity and inconsistency that contributed to its limited customers and Suppliers”.