FSA tells banks to improve way they deal with complaints

The City watchdog will today order banks to shake up their customer services after publishing figures showing that Lloyds alone accounted for more than half a million complaints in the first half of the year.

The Financial Services Authority (FSA), which is preparing to fine two of Britain's major banking groups for failings in complaints-handling following a review earlier this year, will force banks to abolish the current "two-stage" rule by handing any problems straight to a senior executive.

The aim of this is "to incentivise firms to resolve complaints fairly the first time", the FSA said. Financial firms will also have to carry out "root-and-branch" reviews if a series of complaints come in about specific issues.

The FSA is also proposing to increase the maximum award to consumers whose complaints go to the Financial Ombudsman Service, from £100,000 to £150,000. The April review found widespread failings by the banks.

Sheila Nicoll, the FSA's director of conduct policy, said: "Good complaints-handling standards should be the rule, not the exception, and complaints-handling forms a key part of our intensive and intrusive approach to supervise how firms deal with their customers."

Recently, Lloyds and Barclays were highlighted as the worst banks for dealing with complaints, with yesterday's data from the FSA confirming that.

But the British Bankers' Association defended the industry: "The UK banking industry is committed to its customers and to resolving problems as quickly as possible, that is why a lot of complaints are resolved by close of business the next day. It is extremely important to keep the figures published by the FSA in context: the larger the bank is, the more complaints it is statistically likely to receive."