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.