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Sants: PPI was a missed opportunity to restore trust

FSA chief executive Hector Sants says the scandal over the misselling of payment protection insurance was a missed opportunity for banks in restoring customer trust.

Speaking at the British Bankers’ Association international banking conference in London today Sants said £15bn paid out to customers over the past 20 years was an unacceptable cost.

He said: “A restoration of trust requires a visible step-change by you the banks. In my view, PPI was a missed opportunity to demonstrate your intentions. I urge you to take the next one.”

Sants added that the move to the new regulatory structure required change in the attitudes of both banks and regulators.

He said “Unless we all change all aspects of what we do, real change will not be achieved.”

Earlier this week BBA executive director of retail Eric Leenders said banks had “complied entirely” with regulatory rules governing the sale of PPI.

But speaking at today’s conference BBA chairman Marcus Agius said banks need to go further than apologising on PPI, and need to demonstrate they are working hard for consumers and making sure they take out the right product.

Agius said: “PPI was a product where in many instances we got things wrong and we let our customers down. Yes we have apologised and yes we are putting things right.

“While regret and rectification are important virtues when we make mistakes, they are not going to be enough to bring back trust.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. When is Mr Sants going to realise that the only way that you get banks to change is with a big stick as they take no notice of soft speeches, particularly where there are no consequences for the people that are in charge of our major banking organisations.

    PPI insurance was mis-sold on a wholesale basis and therefore there are individuals that are in charge of the bank that allowed this situation to develop, surely this should result in both personal fines and in some cases prosecution for fraud. If this was a small organisation, then the individuals in charge would be disqualified, fined and, in extreme cases prosecuted, so why is this not true of our Banks?

    You cannot encourage a culture of ethics and people standing up for what is right until you support individuals would in the system that are put under immense pressure by senior directors are only looking at a specific target so that they can get the maximum bonus.

    Are board members and chief executives of banks are immune from prosecution when it is quite clear that they created a culture that allowed this level of mis-selling to go on.

    PPI insurance is only the tip of the iceberg; I wonder how long it will be before we start hearing about structured bonds!!

  2. Sants shows yet again how incompetent he and his cronies have been over the last decade.
    Many people have been warning about the poor advice given out on PPI by the banks. (This applies equally to much of the investment advice).
    However Sants and the rest of the cretins at Canary Wharf Ivory Tower have allowed it to continue to the position where it is now a public relations disaster for the finance industry as a whole.
    At least Sants is hectoring the banks over this rather than financial advisers in general.

  3. Sants you have to much to say.

    Why don’t you just pack up and go, and let us deal work with the mess you are leaving behind.

  4. All this anger and vitriol – how naive!

    Your correspondents must surely know that there is a hierarchy of power in the UK, with the Banks at the pinnacle, the Government somewhere in the chasing pack, and the FSA looking for the baton they have dropped on more than one occasion.

    Repeat after me…..”Greed is good”.

  5. Rob Derry (Brunel Mortgages & Loans Ltd)) 29th June 2011 at 2:32 pm

    If this was a small organisation, then the individuals in charge would be disqualified, fined and, in extreme cases prosecuted, so why is this not true of our Banks?

    Peter, to answer your question: I asked the very same thing of my MP and he took up the matter with the FSA. Margaret Cole replied and I will quote you something from her letter:

    “Legally, we cannot punish senior managers just because something went wrong on their watch. We need to prove a degree of involvement or some failure to carry out their responsibilities properly…. Last year, for example, the FSA banned and fined three senior figures in Northern Rock for their involvement in misreporting mortgage arrears figures.”

    So, clearly creating and sustaining a culture that may encourage consumer-damaging behaviour among some individuals is not something that you can be fined or banned for under the FSMA and COB rules.

    My problem with the application of the rules like this is that I thought the whole point of the “responsible persons” regime was so that SOMEONE was responsible for things that went wrong on their watch. Clearly, this lack of knowledge can only go on in a very large company as it’s very difficult if you work with 5 other people to say that you weren’t aware that someone else was flogging PPI to anyone and everyone, employed, self-employed, disabled, unemployed, aged 85 etc, etc and they were being handsomely rewarded for it.

  6. Dear Rob,

    Thanks for your response

    I think that you were lucky to get a response from your MP, I wrote to my MP Dr Daniel Poulter, about a Chelsea Protected Account and RDR and have yet to get a response. Could this be that I am not a big donator to the political system or am I just a cynic?

    I would agree with you that the interpretation of the rules by the FSA are totally inept as the point of having appointed individuals in charge is that they are responsible for what happens on their watch, surely that is the point. The fact is, as a group of highly trained individuals. We need to be shouting this allowed to both the regulator the media and indeed the general public so that action is taken as it is long overdue.

    I also believe that a number of Directors need to be prosecuted under existing money-laundering legislation, for lack of systems and controls in particular when dealing with self certification mortgages. One former director of Halifax went on record to say that they were only checking 15% of all mortgage applications, this was a system that he had direct responsibility for and Directors can be prosecuted under this legislation. So why not?

    If the position within a bank offers you great rewards of multi-million pound remuneration packages and it should also come with the responsibility of that role and if you found to be breaking rules or creating structures that disadvantage clients then you should face the consequences, accordly. This should include prison sentences where systematic mis-selling is proved. If the legislation does not allow for this at this present stage then the legislation should be changed to include it.

  7. The meaningless platitudes and cliches that roll out of this incompetent,overpaid so called head of the UK regulator defies belief!

    ‘Unless we all change all aspects of what we do, real change will not be achieved.” Well that will have the banks quaking in fear and committed to never fleece the public again.

    No in the real world they will carry on with the same old sales driven ‘advice’.

    ‘In my view, PPI was a missed opportunity to demonstrate your intentions. I urge you to take the next one.” If it had been a small IFA practice that ‘urging’ would have been fined off the face of the earth and de authorised! But not so with Hectors friends of course!

  8. “A restoration of trust requires a visible step-change by you…” The FSA

    Hector Sants this happened on your watch and it is your failure. Yes the banks did the misselling but you were the regulator and you allowed them to do it even when I, & many others, wrote to you advsing of gross malpractice in this area.

    Many of the same failed people are rebadging to run another regulator – and the likely outcome…

  9. Dear Rob,
    Thanks for your response

    I think that you were lucky to get a response from your MP, I wrote to my MP Dr Daniel Poulter, about a Chelsea Protected Account and RDR and have yet to get a response. Could this be that I am not a big donator to the political system or am I just a cynic?

    I would agree with you that the interpretation of the rules by the FSA are totally inept as the point of having appointed individuals in charge is that they are responsible for what happens on their watch, surely that is the point. The fact is, as a group of highly trained individuals. We need to be shouting this allowed to both the regulator the media and indeed the general public so that action is taken as it is long overdue.

    I also believe that a number of Directors need to be prosecuted under existing money-laundering legislation, for lack of systems and controls in particular when dealing with self certification mortgages. One former director of Halifax went on record to say that they were only checking 15% of all mortgage applications, this was a system that he had direct responsibility for and Directors can be prosecuted under this legislation. So why not?

    If the position within a bank offers you great rewards of multi-million pound remuneration packages and it should also come with the responsibility of that role and if you found to be breaking rules or creating structures that disadvantage clients then you should face the consequences, accordly. This should include prison sentences where systematic mis-selling is proved. If the legislation does not allow for this at this present stage then the legislation should be changed to include it.

  10. Julian Stevens 29th June 2011 at 8:17 pm

    Given that one of the FSA’s statutory duties is to protect consumers, the opportunity missed was an opportunity on the part of the FSA to put a stop to the mass mis-selling of MPPI before it reached the epidemic proportions it clearly did.

    And it’s hardly as if the FSA can excuse itself on the grounds that it didn’t know what was going on ~ the evidence was plain for all to see. But then the FSA’s speciality seems always to have been after the event regulation. Will we ever read of the FSA having identified a looming problem and nipping it in the bud before it’s become a scandal of national proportions? I for one am not holding my breath.

  11. Dear Hector

    It was a nice day yesterday !!

    “A missed oppertunity to throw yourself off Canary Towers”

  12. In my opinion, the ‘next’ opportunity will be packaged bank accounts, where savers are unwittingly paying for the extra services that these accounts include, yet will rarely benefit from.

    Give it a year or two, and then tide of complaints from consumers who ‘didn’t realise’ they were paying for things they didn’t need.

    If the banks want to restore trust, they need to be more open. For example, after a year if the consumer hasn’t used any of the benefits, maybe they should be asked if they want to keep paying for them?

    I’m afraid I can’t see that happening!

  13. Dr Thomas Huertas Director Wholesale Firms Division FSA said in 2007, the year before tha banks failed (on the FSA watch) :

    ‘Commission-based distribution arrangements tend to lead to conflicts of interest and may result in mis-selling.”

    And whey he went on to say:

    “How do we solve this conundrum? We are genuinely interested in working with banks to find a way to do so.’

    http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2007/0606_th.shtml

    I took issue with Dr Huertas then because I now know his solution was RDR and RDR meant a handover of IFA distribution to the banks. I took issue with Dr Huertas view that the track record of banks justifies their inclusion in any possible solution? I suggested that the FSA focus on banks as a solutions was unwarranted in light of their historical record. Banks have profited from captive clients, lack of consumer choice and the sale of substandard products via tied sales forces.

    The FSA have always had a pro bank agenda and the IFA community is suspicious when they see a regulator displaying partiality without substance for such an unworthy method of distribution. In the case of PPI thousands of consumers have complained to the Financial Ombudsman Service about payment protection insurance (PPI) and bank charges. However, despite determining that there was a problem in the selling of PPI the FSA has taken effective action against very few firms in the case of PPI and it was the Office of Fair Trading (OFT) that finally took on the wider implications role in the case of bank charges.

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