Treasury Committee questions UK’s largest banks on savings rates and CEO pay

• Inquiry: Retail Banks
• Treasury Committee

Last month, the UK’s four largest banks each reported increases to their net interest margin – the difference between the interest a bank pays to savers and what it receives from borrowers. NatWest’s margin has increased by 24 per cent, Lloyds Banking Group’s is up by 16 per cent and Barclays by 13 per cent. This has increased profits in many cases.

In a series of letters, the cross-party Committee of MPs outlines that, despite interest rates rising from 0.25 per cent in January 2022 to four per cent today, the UK’s four largest banks all offer less than one per cent interest for their easy access savings accounts.

The MPs question how Barclays, HSBC, Lloyds Banking Group (which includes Halifax and Bank of Scotland) and NatWest Group (including RBS) determine what proportion of interest rate rises to pass on to their savings customers.

Several banks have also increased the pay of their chief executives. NatWest Group’s chief executive received £5.2 million in 2022 (up 46 per cent from last year), and HSBC’s group chief executive received £5.6 million (a 14 per cent rise in his pay package). The chief executive of Lloyds Banking Group earned £3.8 million last year, with media reports suggesting he could earn up to £9.1 million in future years, or up to £7.4 million with no increase in share price.

The Committee asks whether CEO remuneration is linked to bank profits, net interest margins, and the performance of their savings and mortgage businesses.

The MPs also ask each bank for a breakdown of the revenue and profits generated from their savings products, the value of deposits in their instant easy access saving accounts, and how many customers have over £5,000 in these accounts.

Separately, the banks are asked about the number of basic bank accounts they have opened and closed, and how many applications for basic accounts have been refused over the last year. The largest banks are required by law to provide basic accounts, which are often vital for those who don’t qualify for a standard account, for example due to a poor credit score.

They are also asked how many branches they intend to close in the next two years, whether they have closed any business accounts without a customer’s permission, and for information on house prices and mortgage availability in flood risk areas.

Chair's comments

Commenting on the correspondence, Harriett Baldwin MP, Chair of the Treasury Committee, said:

“While consumers are always advised to shop around for the best deals, it is difficult to avoid the conclusion that our biggest banks are taking advantage of their most loyal customers to increase profits and CEO pay.

The most powerful tool consumers have is to take their money elsewhere. But the banks also have a responsibility here. They need to step up and offer our constituents reasonable savings rates.”

Further information

• The Committee held an evidence session with senior leaders from Barclays UK, HSBC UK, Lloyds Banking Group and NatWest Group on 7 February. Further information about the session, a video replay and transcript, can be found here.
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This article was updated on 2 March to clarify the potential future remuneration of the Lloyds Banking Group chief executive.

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