OREANDA-NEWS. The Financial Conduct Authority's rules on consumer accounts, published yesterday and coming into force in December 2016, are unlikely to trigger notable shifts in depositor behaviour, says Fitch Ratings. But they might force providers to harmonise rates across standardised savings deposits and result in a small increase in deposit flows among UK banks as customers seek higher remuneration. Technological advances are also making it easier for customers to change accounts.

The FCA says that 80% of easy-access savings accounts in the UK have not been switched in the last three years. Banks are able to pay lower rates to long-standing retail savers because these customers tend not to shop around. This behaviour reflects various factors, including brand loyalty, difficulty in comparing accounts, and the perceived inconvenience associated with account switching. Incentives to switch have remained limited while interest rates remain low.

Data provided by BACS, which electronically processes financial information in the UK, shows that 2 million switches have been made since 2013. This is small as a proportion of the total 64 million personal bank accounts in the UK. We therefore do not expect a significant near-term shift in the large market shares of the UK's leading banks.

But the new FCA policies are part of a wider programme of regulatory activity designed to make it easier for customers to switch, and savings trends in the UK could change over the longer term. The ongoing Competition and Markets Authority investigation is also due to reach a provisional decision on measures to increase customer switching by February 2016, and the Current Account Switching Service launched in September 2013 is designed to address practical barriers to switching.

The FCA rules are designed to improve disclosure and facilitate account switching. A "sunlight remedy" was also introduced, intended to provide transparency on the rates banks pay to longstanding customers. The FCA has started to publish data on rates payable on cash ISAs (a tax-efficient savings product), although in the first instance sunlight remedies are aimed at market commentators and not directly at consumers. The timescale for achieving cash-ISA transfers will be halved to seven days by 2017. The "convenience" remedies that will allow customers to manage savings and accounts in one place, even if products are provided by different banks, are taking longer to implement due to security concerns.

The FCA is determined that banks should change their behaviour towards customers. But we think a rise in interest rates is more likely to achieve a greater shift in deposit mix across the UK banks, with funds shifting into savings accounts. This will affect funding costs across the industry and probably reduce the margin benefits UK banks expect to achieve once base rates rise.