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Martin Wheatley calls on banks to put customers before profits

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 night, Wheatley (pictured) stressed returns for shareholders should be driven by “good profits, rather than profit at any cost”.

Wheatley 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.

He also said with the increasing rarity of defined benefit pensions, and with people living longer and insufficient savings, consumers are also finding it difficult financially.

But Wheatley argued it was difficult for consumers to compare products in some cases, for example packaged back accounts which are structured in a way to make it hard to establish whether the product is good value.

He also cited the misselling of payment protection insurance and early repayment charges on mortgages as examples where “profits were more important than what was right for the customer”.

Wheatley said: “In all of this, we accept 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.

“The key point is in the FCA 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 and take this seriously.”

Wheatley also confirmed the FSA’s review of the sale of interest rate swaps by banks.

The products were sold to customers, including small businesses, to cover the cost of increased payments in the event of interest rate rises. When interests fall the customer has to pay the bank.

He said: “We are taking seriously the concerns small businesses have raised about interest rate products that some banks have sold, and are carrying out work to understand in more detail the types of products that been sold, so that we can assess the scale and severity of any potential issues.

“The areas we are looking at include product design, sales processes and practices, and sales incentives. This will help us to see whether there is a widespread issue and what action we can take, if appropriate. If we find evidence of breaches of our rules or misselling, we will take action.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Customers should always be in the front of any business, otherwise they will not survive. however, the word profit seems to be a dirty word at the present. Without profit there is no business and also fees salaries tax vat etc cannot be paid and unfortunateley these all seem to be going up. Perhaps there should be a concentration by the great and good to help cut costs.

  2. How much does he get paid for stating the obvious?

  3. Good luck with that. Mind that airborn porker.

  4. terry… The word “Profit” has been effectively removed from the dictionary as far as my company and thousands like mine who have been savaged by these IRSA’s! You talk of Fees Taxes and Salaries going UP?? Lets take those one by one… Fees charged to us BY banks have gone through the roof….. Tax? I have only seen Tax going one way and that’s INTO banks to the tune of £80 odd billion? Salaries? How in gods name are they going up when all the banks are cutting jobs by the thousand!!!!!

  5. Why does he need to say this, to state the obvious, to state what is the regulatory bedrock of advice. What he probably meant to say was, ” now that we have shafted the IFA, everyone will have to come to you and you can cleanup and make even more massive profits.” Ps.” Don’t forget who gave you ‘carte blanche’ over the minions when it comes to giving out the big jobs with fat salaries & big bonuses!”

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