LONDON (UK) – The Financial Conduct Authority will not begin a formal investigation into how banks charge for overdrafts. Instead, it will put them on notice on Wednesday of a complete assessment of their pricing next year.
In January, the watchdog had given banks two weeks to explain the changes to overdraft rates, affecting close to eight million customers, or face punitive action.
The banks including HSBC, RBS, Nationwide and Santander announced plans to charge nearly 40% for overdrafts. This is more than double the earlier charges.
In a statement issued on Wednesday, the FCA said, “We have analysed the strategic, competitive and financial drivers of banks’ overdraft pricing decisions based on their responses.”
“Having reviewed the evidence we obtained we do not intend to open a formal investigation at this stage.”
The change in norms were aimed at rectifying the “dysfunctional” overdraft market. This prevents banks from imposing a fixed daily or monthly fees and from charging more for unauthorised overdrafts.
According to the watchdog, a large chunk of banks view the pricing changes would reduce their total overdraft revenue by between a quarter and a third, or more than half a billion pounds.
“Despite banks increasing headline interest rates, the cost of borrowing will go down or remain unchanged for most people,” FCA said.
“We will be keeping a close watch on how prices develop, particularly during and after the coronavirus pandemic.”
(Photos syndicated via Reuters)
This story has been edited by BH staff and is published from a syndicated field