Banks that pay ultra-low interest rates on savings accounts because customers tend not to switch away may face a crackdown from the industry watchdog.
The Financial Conduct Authority (FCA) is considering whether to intervene to boost competition after a preliminary report found many people aren't switching accounts, meaning banks are able to get away with paying them lower rates.
The regulator says at the largest banks, more than 80% of the total balances in easy-access accounts are held by people who also have a current account with that same bank. (See our Top Savings Accounts to get the most out of your savings.)
But on average, the largest current account providers pay lower rates on savings than their rivals. The FCA says over the last two years, the average rate was 0.5%, while other providers offered 1.2%.
The FCA also found evidence that bonus rates persuade people to switch, but it's concerned about the way they are communicated.
When the FCA hinted last year that it may tinker with "teaser" rates, MoneySavingExpert.com's founder, Martin Lewis, urged it to continue to allow providers to use this incentive to ensure savers earned decent rates. See Martin's Please don't screw up the savings market blog post.
Final report to come
The FCA will now undertake further research before deciding whether or not it needs to step in. In particular it will look at what can be done to ensure people are aware of the rates they receive, and of the rates on offer on other accounts.
The regulator will also consider the information that customers are given when rates are changing and whether it is possible to give them greater insight into how their interest rate is likely to change over time.
The final report will be published later this year.
FCA chief executive Martin Wheatley says: "Promoting effective competition and ensuring that markets work well for consumers is a key objective for the FCA.
"In looking at cash savings, we will examine an area that affects most people and see if there is action we need to take.
"We know that switching rates are low for financial services products and savings accounts are no exception. Even when people do switch their accounts, they are twice as likely to go with their existing provider than move to the offering of a competitor."
Additional reporting by Paloma Kubiak.