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By Huw Jones
LONDON, April 20 (Reuters) - Britain's financial
watchdog said on Thursday it would use new, tougher consumer
protection powers from July 31 to ensure banks pass on increases
in interest rates to savers, and further action was not ruled
out.
The Financial Conduct Authority (FCA) will begin phasing in
its "consumer duty" from July 31, giving it stronger powers to
ensure that the companies it regulates act in the best interest
of their customers.
Since December 2021, the Bank of England has increased
interest rates from nearly 0% to 4.25%, with markets expecting
another increase next month.
FCA Chief Executive Nikhil Rathi said the watchdog was
closely monitoring how firms pass through rate changes, and the
consumer duty would represent a step change in how the FCA can
ensure firms are delivering the best outcomes to customers.
"We have made clear that firms should be able to justify and
explain the rationale for the speed and degree to which they
make changes to their various savings rates," Rathi said in a
letter to parliament's Treasury Select Committee.
The FCA consulted in January 2020 on whether to introduce a
single 'easy access' rate on cash savings or SEAR to stop any
"loyalty penalty" in cash savings markets - or longstanding
customers get worse deals than new customers.
This work was put on ice due to COVID and ultra low rates.
"Given rising interest rates and firms' performance on base
rate pass-through we have considered whether we should restart
this work," Rathi said.
"However, we believe the Consumer Duty gives us greater
flexibility to react to market developments, rather than needing
to introduce detailed and prescriptive rules."
But the FCA remains open to revisiting SEAR type measures,
or other more onerous interventions, if it still sees "loyalty
penalties" being applied, Rathi said.
(Reporting by Huw Jones Editing by Jason Neely and Mark
Potter)
Messaging: huw.jones.thomsonreuters.com@reuters.net))
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