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FCA says banks must put customers before profit

Financial Conduct Authority chief executive designate Martin Wheatley says the FCA will be focused on ensuring banks put customers’ interests ahead of profits under the new regulatory structure.

Speaking at a Chartered Institute of Bankers in Scotland event in Glasgow last week, Wheatley said returns for shareholders should be driven by “good profits rather than profit at any cost”.

He said he recognised banks face challenges in searching for profit against a backdrop of compressed margins, competition and the eurozone crisis pushing up wholesale funding costs but he argued that the misselling of payment protection insurance and early repayment charges on mortgages were clear examples where “profits were more important than what was right for the customer”.

He said: “Firms need to be able to generate acceptable returns for shareholders and have to be financially robust but this is about good profits rather than profit at any cost – either to firms’ own stability or their customers’ best interests.

“We will be looking to firms to construct business models where fair treatment of customers is central and we will expect those in executive management and on the boards of firms to step up their engagement with this side of the business.”

Wheatley said the regulator was carrying out a review into the sale of interest rate swaps by banks, which were sold to cover the cost of increased payments in the event of interest rate rises. When interests fall, the customer has to pay the bank.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 12th May 2012 at 10:05 am

    I know virtually nothing of Martin Wheatley so it’s too early to formulate any judgements, though we sincerely hope he’ll be a considerable improvement on his two predecessors.

    That having said, isn’t it extremely late in the day to be pointing out that the entire culture of the banks needs to be radically and fundamentally improved? Virtually all the large scale mis-selling scandals of the past 20 years ~ pensions, endowments, loans to small businesses and now PPI ~ seem to have been down to the banks, in no small measure due to laissez faire regulation. When, if ever, is the FSA going to get a proper grip on what the banks do and start holding individuals to account for regulatory failings instead of, after the damage has been done, just dishing out fines that for the institutions concerned, are little more than flea bites?

    And what about the decidedly dodgy practice of counter staff tipping off their financial services colleagues whenever a customer makes a large deposit, leading to said customer being pressurised into arranging an appointment for a “financial review” which, in reality, is nothing more than a see what we can sell ’em meeting?

    Meanwhile, the relentless persecution of the IFA sector continues unabated.

  2. Not for minute will the banks drop there Svr, Ucb who are a part of nationwide are charging massive rates and you can’t mortgage away from them ex self vert lender
    The goverament are so naive he really wants a realty check

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