Britain’s banks face new rules

LONDON - Reuters

New rules will be in place to stop banks from mis-selling of financial products.

Britain’s banks face new rules to stamp out sales incentives that have encouraged mis-selling of financial products going back two decades, the Financial Services Authority said yesterday.

U.K. banks have been hit by a series of scandals in the last 20 years over sales of unsuitable products, ranging from home loans to pensions, to customers who often did not need them. Compensation for mis-sold loan insurance alone will cost the banks nine billion pounds.

Martin Wheatley, the FSA’s managing director, said in a speech at a Reuters Newsmaker event that banks used to be a service to help customers.

“Some time ago, this changed - financial institutions have changed their view of consumers from someone to serve to someone to sell to,” Wheatley said. 

Cultural change is needed at the top to tackle poorly designed incentive schemes that “too often result in customers being sold products they do not need, while boosting the earnings of the sales person.”