The Financial Conduct Authority (FCA) believes the savings market could be working better for people.
Therefore, the British regulator has proposed to reform the easy access cash savings market.
If implemented, the new rules would force all firms to set a single easy access rate (SEAR) across all easy access accounts.
While the proposed rules would give businesses flexibility to offer multiple introductory rates for up to 12 months, they would have to pick one SEAR once that period is up for their easy access cash savings accounts and one for their easy access cash savings ISAs.
The FCA argued that the new rules would boost competition and that consumers would will benefit by £260m from higher interest payments as firms will compete on the SEAR.
“Competition is not working well for many of the 40 million consumers with easy access savings accounts and we want that to change,” said Christopher Woolard, executive director of strategy and competition at the FCA.
“Our proposals would mean firms have a single rate for customers immediately after their accounts have been open for 12 months. Firms will choose the rates they offer and the rates they offer will have to be clearly published.
“This will prevent firms from gradually reducing interest rates over time and make them compete for all their customers. We are concerned that many longstanding customers are seeing a poor outcome and we want firms to focus more on these customers.
“The new rate will also make it easier for savers to know whether they are getting a good deal after any introductory offer has expired.”
The FCA also suggested that firms must publish data every six months on the SEARs they offer to make it easier for people to compare at the time of opening their account with the rates that other firms are currently offering.
The FCA is now seeking feedback on the proposals set out in this Consultation Paper, by April 9, 2020.
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