Alex Brazier, executive director of financial stability
The UK’s biggest banks are pocketing £1 billion a year by paying stingier rates of interest to long-suffering savers than their smaller rivals.
Figures from the Bank of England show that major high street banks pay 0.2 per cent less on average than their competitors.
The big providers would have to pay £1 billion a year more in interest if they matched the rates of lesser-known rivals, said Alex Brazier, executive director of financial stability at the Bank.
It means that millions of savers are still being short-changed by penny-pinching banks after enduring years of rock-bottom interest rates.
Mr Brazier told MPs on the Treasury Select Committee last week that he expected the advantage to be eroded over time as competition kicked in – but the difference in interest rates will enrage customers tired of their treatment by the big lenders.
The Bank declined to say which banks it was referring to, but experts said the Big Four of HSBC, Barclays, Lloyds and RBS – which owns NatWest – were to blame. Anna Bowes, director of comparison website savings champion.co.uk, said: ‘High street banks pay poor rates because they can. A lot of cash savings remains with the personal current account providers, as it is convenient.
‘Many savers will also think that it’s not worth their while switching elsewhere – but when you might be earning as little as 0.05 per cent when you could be earning up to 1.3 per cent, this really can make a difference. On a balance of £10,000, it’s the difference in earning £5 a year or £130.’
The Big Four banks control more than 75 per cent of the current-account market, giving them a massive advantage in attracting deposits from savers.
Insiders say the current accounts also give the banks cheaper deposits – because banks typically pay 0 per cent to customers who keep their current accounts in credit.
James Daley, managing director of campaign group Fairer Finance, said: ‘Banks have been paying poor rates on their savings accounts for years. It’s something that comes through loud and clear in the customer satisfaction data that we collect.
‘For savings, building societies have a much better track record of offering stronger rates and keeping them at reasonable levels, even after any initial offer period is over.’
Ms Bowes said it wasn’t just long-standing customers who were earning less.
Her website’s figures showed that instant access rates offered by the Big Four ranged from 0.05 per cent at HSBC to 0.20 per cent at Barclays, with Santander offering 0.25 per cent. But French bank RCI offers an instant access savings account paying 1.3 per cent.
In response, RBS pointed to various savings accounts it offered which paid higher rates. HSBC UK said: ‘Our savings accounts are competitive and cater for the different needs of savers.’
Barclays and Lloyds declined to comment.