On 20 April 2023, the House of Commons’ Treasury Committee published a letter from FCA Chief Executive, Nikhil Rathi. The letter outlines the FCA’s responses to questions posed by the Treasury Committee regarding competition in the retail banking market. These included questions on the FCA’s work in relation to the savings market (and easy access savings accounts in particular), competition in the mortgage market, mortgage forbearance measures in light of the cost of living crisis, and the impact of the Consumer Duty on how financial institutions sell and price their mortgage and savings products.

The FCA’s responses to the Committee’s questions include the following updates and comments:

• The FCA has been monitoring the speed and extent of firms’ pass-through to their savings products following increases in the base rate, and has challenged firms that had made ‘relatively small increases’ to their variable rate savings products in 2022 and where there was a ‘material time lag’ to pass through the increased rates to savings products relative to mortgages.
• In its assessment of firms’ compliance with the Consumer Duty, the FCA will review the fair value assessments firms have made of their savings products and follow up with any firm whose approach to pricing seems at risk of not providing fair value.
• The FCA began consulting on a Single Easy Access Rate (SEAR) policy in January 2020 with the aim of addressing concerns about a potential ‘loyalty penalty’ in the cash savings market. The COVID-19 pandemic, and the historically low interest rate environment, caused it to stop this work in November the same year and the consultation never progressed past the preliminary phase. The FCA has considered whether it should restart this work given rising interest rates and firms’ performance on base rate pass-through, but it believes the Consumer Duty gives it greater flexibility to react to market developments, rather than needing to introduce detailed and prescriptive rules.