UCL Professor Frederic Malherbe has appeared in a number of prominent media outlets in recent weeks to voice concerns over the lack of transparency between banks and consumers within the UK. In a recent op-ed for the Financial Times, Fred, an expert in economics and finance, argues that banks should be compelled to pass on rates to savers, a notion he echoed in a recent appearance on Sky News.
Despite the global cost of living crisis, banks around the world announced record increases in profits throughout 2022. In the UK, for example, Lloyds announced that their profits had almost doubled. In his recent op-ed for the Financial Times, Fred notes that the Bank of England’s benchmark base rate went from 0.1 percent to 4 percent in an attempt to combat inflation and, while this was passed on to borrowers (primarily mortgage-holders), savers were kept in the dark.
In the piece, Fred argues that if retail banks had actually passed these rates onto savers, the Bank of England would be able to achieve their goals of tackling inflation much quicker. He also argues that it would ease the financial burden on consumers, noting that, ‘At the time when central bankers’ job is to take painful yet needed decisions, a simple reform that goes towards both easing their task and helping the public shouldn’t be overlooked.’
Ultimately, the difference in treatment between borrowers and savers from retail banks has meant the gap between what banks charge borrowers and pay savers has widened, which has been crucial in their increase in profits at a time of economic instability for many. Appearing on Sky News to discuss this issue, Fred argues that calling on banks to pass on these interest rates to savers would improve the transmission of monetary policy, which would likely mean that central banks would have to raise interest rates less.