New research claims that 10 misconduct scandals have cost the UK’s banks £53 billion in fines and other penalties since the turn of the century.
Think tank New City Agenda says the biggest of the lot has been the cost of mis-selling PPI for which the banks have set aside a total of £37.3 billion to pay out past and future successful claims – more than four times the cost of staging the London 2012 Olympics.
The report says: “Banks have proved hopeless at estimating the total cost of their misconduct – with some increasing their PPI provisions 10 times over the past three years.
“Legitimate complaints have been rejected and banks have delayed writing to customers, meaning that the scandal has taken years to resolve and cost billions in administrative costs.
“The scandals covered a wide range of products and practice, but the root causes of these issues include poor quality products, inappropriate staff bonus schemes and an aggressive sales-based culture.”
The report also claims that, if it were not for the cost of the various misconduct issues, Britain’s high street banks would be ‘robustly profitable.’
“This makes it even more important for shareholders to engage and monitor the progress made by banks in changing their culture. Shareholders should be championing initiatives to raise professional standards and change the culture,” it added.
Britain’s lenders have already paid out £22.9 billion on successful PPI claims since January 2011, but recent research has shown that includes a huge amount of interest paid on mis-sold policies and experts claim there are billions more to be paid.
The banks have all increased their PPI payment pots recently, in anticipation of a deluge of new claims expected with the Financial Conduct Authority (FCA) announces the imposition of a PPI deadline. It is expected to run for two years after which consumers would lose the right to claim forever.
The FCA believes around 45 million PPI policies have been sold overall and no-one can be sure how many of them were mis-sold, though the FCA believes there have been more than 16 million PPI claims since January 2011.
The deadline, when announced, will be the subject of a £42 million advertising campaign paid for by the banks to make sure all consumers get the chance to make a claim before time runs out.
New City Agenda founder, Lord McFall, says: “The profitability of UK banks has been imperilled by persistent misconduct and an aggressive sales-based culture. This has made every citizen poorer through our pension funds and our ownership of the bailed-out banks.”
He added that he believed bank shareholders ‘should be leading the campaign to change bank culture and raise professional standards’ as well as demanding ‘significant clawback of bonuses’ for account managers.
Other scandals to have rocked the banking industry since 2000 include LIBOR and foreign exchange rate rigging, interest rate swaps mis-selling, packaged bank accounts, pensions and the mis-selling of endowment mortgages.
“The FCA believes around 45 million PPI policies have been sold overall and no-one can be sure how many of them were mis-sold, though the FCA believes there have been more than 16 million PPI claims since January 2011”