BANKS which rely on customer inertia to pay ultra-low interest rates on savings accounts are facing a potential crackdown from the City watchdog.

The Financial Conduct Authority (FCA) is considering whether to intervene in order to boost competition within a market in which six providers hold roughly two-thirds of all cash savings balances in the UK.

It is concerned that because many consumers do not shop around, banks are able to pay lower interest rates to long-standing customers.

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The FCA said: "While some consumers may switch away in response to the lowered rates, a significant number of consumers do not."

The investigation has been focused on easy access accounts and no-term cash ISA accounts.

The FCA will now undertake further research before taking a view on whether it should take further steps to ensure competition is working in the interests of consumers.

Kevin Mountford, head of banking at MoneySuper­Market, said that if people did switch their savings accounts more often, this would put more pressure on banks and building societies to offer better deals "across the board".