The FCA’s 2015 Cash Savings Market Study found that the cash savings market is not operating effectively for many consumers, especially those with easy access cash savings accounts or easy access cash ISAs. The current market setup also leads to a lack of competition for longstanding customers, who tend to receive lower interest rates on their savings than new customers. Following that study, the FCA published a Discussion Paper (DP18/6) which outlined potential solutions to tackle those issues, including the introduction of a Basic Savings Rate (BSR). Against this backdrop, the FCA has today launched a consultation on its proposals to simplify and improve competition in the cash savings market; the FCA intends to make it easier for consumers to understand the cash savings market and to get a good deal.
The proposed rules build on the proposals put forward in DP18/6, save that the BSR has been renamed Single Easy Access Rate (SEAR). The FCA aims to maintain competition on new savings accounts by affording firms the flexibility to offer customers a range of introductory rates for up to 12 months of opening a new account, following which firms would apply one SEAR for their easy access cash savings accounts, and one rate for their easy access cash ISAs. The FCA also hopes that this will ensure equal benefits for their longer-standing customers, who would have the SEAR applied to their savings accounts or ISAs when the new rules come into force.
The FCA will also require firms to publish clear data on their SEARs to enable third parties, e.g. intermediaries and media organisations, to more easily highlight the rates between products and providers. The regulator hopes that this ‘sunlight remedy’ will drive competition and transparency by making it easier for consumers to navigate the market.
Responses are invited by 9 April. The FCA intends to publish next steps, and if it decides to make new rules, its final instrument, in the second half of 2020.