HSBC under fire as rate cuts may not be passed on
Britain’s biggest bank was accused of “profiteering” yesterday after a senior executive signalled it may not pass on the full effect of interest rate cuts to customers.
David Hodgkinson, chief operating officer at high street giant HSBC, said borrowers faced “stickiness” even if the Bank of England lowered rates as expected on Thursday.
Mr Hodgkinson, part of a business delegation accompanying Prime Minister Gordon Brown on a tour of the Gulf, told Bloomberg News credit had been “mispriced” over recent years.
He added: “As an adjustment process that is taking place, clearly if interest rates are down significantly the rates for borrowing will go down. But I am not going to say it is absolutely linear, because it depends on the particular (situation) and the risk.”
Asked if that meant there would be “stickiness” in rates, Mr Hodgkinson replied: “Yes.”
Shadow chancellor George Osborne said the comments showed the premier’s campaign to reduce borrowing costs for families was not working.
“It’s all very well Gordon Brown exhorting the banks to pass on the rate cut, but he hasn’t even managed to persuade members of the entourage accompanying him on his Middle East trip,” he said.
“The Government’s recapitalisation package may have rescued the banks, but there’s not enough evidence that it’s helping to get credit to responsible homeowners and small businesses who need it.”
And Liberal Democrat Treasury spokesman Vince Cable warned that HSBC would be “on very thin ice” if it did not let people feel the benefit of a reduction.
“It is difficult to see the justification for Mr Hodgkinson’s comments that a cut in the Bank of England’s interest rates may not be fully passed on to customers,” he said.
“Banks are only too happy to increase the cost of lending when interest rates go up. For customers to get a fair deal, this needs to be a two-way street.
“When the whole banking industry owes so much to taxpayers for their very survival, any bank will find itself on very thin ice if it is found to be unfairly profiteering from its customers.
“As the credit crunch continues to keep millions of customers and small businesses in a stranglehold, borrowers need interest rate cuts now.”
Downing Street insisted people should see the “benefits” when the Bank of England cuts interest rates, but refused to criticise HSBC directly.
A spokesman said: “When official rates are cut customers would expect to see the benefits of that.
“But at the moment we are seeing difficulties with interbank lending.”
He added: “The Prime Minister is clear that we are taking the action that we are taking so that more mortgage holders and small businesses are feeling the benefits of that action.”