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British banks have defended the interest rates they offer savers in a meeting with the financial watchdog, saying data protection rules prevent them from informing certain customers of better deals.
The Financial Conduct Authority held a summit with lenders, including the big four banks, on Thursday in response to growing concerns about low interest rates on their savings accounts.
Banks have been accused of profiteering, as Moneyfacts says a two-year savings account offers an average interest rate of 4.84 per cent, while two-year fixed mortgages charge an average of 6.54 per cent.
The FCA has discussed with banks the need to communicate more clearly to customers about changes to savings rates and options, according to two people familiar with the negotiations.
“What they’ve asked us to do is to be more in control of what we’re planning at times of key rate changes,” said a person with knowledge of the meeting.
But bankers at the meeting said GDPR privacy rules made it harder for lenders to contact customers about savings deals when they opted out of receiving marketing material.
“We can’t look at it [individual customers] and they say ‘I can tell you about this rate’ if they’ve given up on marketing because of GDPR rules,” said a senior banker at the meeting. “We think it’s crazy because we’re trying [promoting deals] websites, apps, accounts.”
Another banker said: “They want banks to put in more effort. . . about how you communicate with customers, and in particular those on instant access savings accounts, so that they are aware of other options available to them.
“There are a lot of things around GDPR and marketing permissions that can currently restrict us from being able to engage with certain customers. We’re happy to do it, but we need you to help us make sure we don’t break any other rules.”
The meeting was also attended by Lloyds Banking Group, HSBC, NatWest and Barclays. Leading politicians have accused British banks of not passing on the benefits of higher interest rates to customers. The Bank of England base rate is currently 5 percent.
At the meeting, a senior banker said, they also discussed whether lenders should immediately pass on interest rate hikes to savers.
The FCA said in a statement after Thursday’s meeting that it wanted faster progress on improving savings rates. Two people with knowledge of the meeting said the FCA had made clear during the talks that it would not be a “price setter”.
Bankers also argued that lenders should have different savings rates depending on their business model, one of the people said. For example, a lender that relies heavily on deposits to finance mortgages may use higher interest rates to attract customers.
“Banks have to manage both sides of the balance sheet and different organizations have different needs for funding and liquidity – that was at the meeting, it was a good discussion,” said the banker. “But I think there’s a lot of political pressure and noise around banks, profits, interest rates and instant access accounts.”
The FCA said after the meeting: “Many people are feeling the pinch of rising interest rates and prices, so it is more important than ever to offer them fair and competitive savings rates.”