The head of bank operations for RBS and Natwest, Les Matheson, has publicly declared that he wants the financial regulator to do more to combat the multitude of so-called "teaser" rates that are being offered by banks.
The teaser rates are banking deals on either savings accounts or mortgages that offer very enticing levels of interest for a short introductory period and then raise the price immediately afterwards. The idea is that new customers will be drawn in by such competitive starting rates without being aware that they are agreeing to a substantial price rise somewhere down the line. Matheson is of the firm belief that deals such as these must removed from the market due to their misleading nature.
He is however still in favour of the buy-let mortgages that his bank is continuing to dish out to customers. The buy-let market has expanded rapidly in the past 12 months - growing by 300% in total. This is in spite of the Bank of England's warnings that the growth in this sector could be hazardous to people's financial stability. The claim from Matheson is that he is simply supplying what the market is currently demanding.
Going back to the subject of promotional deals Matheson went on to say:
ëI think the Financial Conduct Authority needs to do more. We need to take out the concept of promotional pricing in financial services.í
He has already started to get rid of these teaser deals within his own bank and has also done away with 0% balance transfers on credit cards and personal loans.
ëI think our competitors should stop a lot of that promotional pricing,í he says. ëIt can encourage people to do the wrong thing for the wrong reasons. For example we know that more than 30 per cent of people who take out a zero per cent balance transfer on debt donít do the right thing once they get to the end of the zero per cent period. They then just roll on to a high rate.í
However whilst this may be a less misleading way to conduct financial business, it may not necessarily please many of RBS' or Natwest's customers because it means that their rates will not change at all over the course of their term.
ëPeople may say: ìThatís great Les, but half a per cent isnít going to set the world on fireî. Thatís true, but at least I am thinking about all of my customers ñ particularly my existing customers.í
Matheson is also trying to tackle the controversial subject of mortgage fees that often cost thousands of pounds and must be paid up front.
He firmly believes that these fees should be calculated into the advertised annual percentage rate (APR). Doing this would highlight the flaws in some of the money saving options that are perceived to be out there on the market right now. He also believes that insurance companies should be forced to follow suit.
ëThe insurance industry is another area we need to look at. The concept of having a low rate which then jumps up the second year is just another example of promotional pricing. It is another example of the market competing in the wrong sort of way. We are going to make changes there too.í
Even though he is pushing hard for reform in the area of mortgage advertising, he is still attempting to increase the amount of money that RBS make off of mortgages, especially within the buy-let market.
ëOn buy-let, we are responding to what customers are asking us for. For some of our customers looking for a return on their money, buy-let is an area that can give you a reasonable yield compared to a savings account, or frankly compared to some investment products.í
RBS released positive results for the first six months of the year, with their portion of mortgage lending growing at more than three times as quickly as the rest of the market. Matheson stated that this was necessary in order for them to make money in the current economic climate.
ëYou canít make money on time deposits. Given where interest rates are, lending products are where we should be going from a shareholder perspective.í
It is important to note here that when Matheson refers to "shareholders" he is actually talking about us because RBS is 78% owned by the taxpaying public.
The government has started to think about going through the process of selling this stake off, with RBS saying that it is prepared for that to happen. Matheson views the bank's upcoming success could rely heavily on the success of its mortgages.
He has also stressed the importance of the sale of other products by the bank, these include current accounts, mortgages and credit cards. A sale strategy based on all three of these could be pivotal in their success.
He also admitted that for a while he was worried about the impact that new payment methods would have had on the banks.
ëWe had been fearful that tech companies would try to cut the banks out of their payments systems. But Apple, with Apple Pay, has chosen not to do that,í he says.
However Apple Pay chose not to sidestep the banks' payment processes.
ëIf one of the largest companies in the world chooses not to cut out the banks, that is reassuring for financial institutions and the role they can continue to play,í he says.
Matheson has also stated that we should not be concerned about the fact that 100 of the bank's branches will be closed this year, saying that customers will be able to access services through places such as the Post Office.
ëWe are investing in branches. We will have refurbished half of our branch network by the end of this year. But a branch is less to do with transactions and much more to do with helping with financial needs.í