British lawmakers further pressure banks over savings rates, exec pay
An influential group of British lawmakers have questioned whether banks are making excessive profits without passing the benefit of central bank interest rate hikes on to savers, in a series of letters to bank bosses sent on Wednesday.
The Treasury Select Committee said profit margins at the four biggest British banks - Lloyds Banking Group (LLOY.L), NatWest (NWG.L), HSBC (HSBA.L) and Barclays (BARC.L) - grew in 2022 earnings published last month, while some also boosted boardroom pay.
"While consumers are always advised to shop around for the best deals, 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," said Harriett Baldwin, chair of the committee.
The committee has asked the four banks to justify why they offer less than 1% interest on easy access savings accounts, despite the Bank of England benchmark rate rising to 4%.
A spokeperson for UK Finance, an industry body which represents the banks, said the market for savings products is competitive and consumers should shop around, but that executive pay was a matter for individual firms to address.
Top executives from the lenders were already hauled before the committee last month to answer criticism they were too slow to pass on the benefits of central bank rate hikes to savers.
The bankers said at the time they had started to pass on higher rates, including on fixed-term products, and that profitability was recovering after years of low margins.
Lenders are also facing calls from campaigners for a windfall tax on their profits, as in the energy sector, at a time when millions of their customers are struggling with a cost-of-living crisis.
Banks reported robust profits for 2022 in earnings last month, but warned margins could already have peaked as competition steps up.
Analysts have questioned whether political pressure could have been a factor in banks outlining cautious guidance on their future earnings potential.
"While consumers are always advised to shop around for the best deals, 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," said Harriett Baldwin, chair of the committee.
The committee has asked the four banks to justify why they offer less than 1% interest on easy access savings accounts, despite the Bank of England benchmark rate rising to 4%.
A spokeperson for UK Finance, an industry body which represents the banks, said the market for savings products is competitive and consumers should shop around, but that executive pay was a matter for individual firms to address.
Top executives from the lenders were already hauled before the committee last month to answer criticism they were too slow to pass on the benefits of central bank rate hikes to savers.
The bankers said at the time they had started to pass on higher rates, including on fixed-term products, and that profitability was recovering after years of low margins.
Lenders are also facing calls from campaigners for a windfall tax on their profits, as in the energy sector, at a time when millions of their customers are struggling with a cost-of-living crisis.
Banks reported robust profits for 2022 in earnings last month, but warned margins could already have peaked as competition steps up.
Analysts have questioned whether political pressure could have been a factor in banks outlining cautious guidance on their future earnings potential.