The FSA has attacked banks and big financial services firms for basing their business models on aggressive sales tactics.
Speaking at a Which? conference on financial services reform in London this week, FSA interim managing director of the conduct business unit Margaret Cole rejected claims by the British Bankers’ Association executive director of retail Eric Leenders that many people continue to trust high-street banks.
Cole said: “I am not in the business of banker bashing but if you look at the evidence, unfortunately in relation to payment protection insurance, which has been the most recent saga, it was really the big retail banks who were the major players.”
She said various misselling issues have emerged over the last 20 years costing consumers £15bn, not including the £9bn cost of PPI misselling.Cole argued banks need to develop “a cultural responsibility” so less regulatory intervention is needed.
She added: “It is particularly striking to me that when we have done business model analysis we have seen how much of the business models of major institutions are being driven by aggressive product sales. If that remains the business model, there is always going to be a high risk of misselling of products.
“We have to be prepared in the new culture of the FCA to be more interventionist to head off those issues before they really get going.”
Baronworth Investment Services director Colin Jackson says banks need to stop offering staff bonuses and setting high sales targets to tackle aggressive tactics. He says: “If banks were to abolish the bonus system that would stop staff aggressively selling.”