Santander faces fine after FSA puts banks to the test
Regulator's 'mystery shopper' exercise reveals industry still making basic mistakes
Banks were embroiled in yet another scandal last night after the City watchdog found that one in four bank and building society financial advisers provided poor advice when approached by mystery shoppers.
It is understood that Santander could now face a heavy fine after being referred to enforcement by the Financial Services Authority. The bank may shut down its advice business, after announcing a strategic review on the same day the FSA unveiled its findings.
Five other financial institutions have been ordered to improve.
The watchdog said it was "disappointed" that basic mistakes were still apparently widespread across the industry.
Clive Adamson, the director of supervision, said: "Given the previous guidance we have issued and the enforcement action we have taken against firms in the past, it is disappointing that some advisers in the retail banking sector continue to make basic financial planning errors."
While he was pleased that companies had taken swift action to remedy the situation, he said they faced close scrutiny to ensure they did what they had promised.
The significance of the review is underlined by the fact that it is the first the regulator has published since its payment protection insurance (PPI) mystery shopping exercise in September 2008. That uncovered a major financial scandal whose cost to the industry has been estimated at as much as £20bn.
The Financial Conduct Authority, which will be taking over much of the FSA's powers, is likely to carry out similar exercises. Martin Wheatley, who will head the new regulator, has repeatedly warned the industry that he wants to see it providing "good outcomes" for consumers.
In one case described by the FSA a company was approached by a man asking for advice on how to invest a lump sum of £30,000 for three to four years. He had £9,000 of debt that he was repaying at high levels of interest, but the adviser urged him to put the whole of the lump sum into an investment which would have returned less than the interest on his debt.
Neither the FSA nor Santander were prepared to confirm that the bank's advice arm was the one facing enforcement action. But Santander's advice service has been causing it problems for some time. In December the company ordered 800 advisers to undertake intensive retraining amid fears that staff would struggle to meet new rules introduced as part of the FSA's Retail Distribution Review.
A Santander UK spokesperson said of the review: "We are considering the findings in the context of the significant actions we took in 2012 to prepare for the post-RDR world. We continue to believe it is important to offer customers access to a broad range of financial products which are suitable to their needs and individual situations, and we are working towards that objective."
While the review is under way the bank will not pursue new business, although it will continue to provide advice to existing customers with maturing investments.
Santander said it had consulted with unions before making the announcement but insisted that no staff were at risk of redundancy "at this time".
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 3 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 4 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 5 Isis publicly behead man in Syrian town square for 'insulting Allah' as he screams for help
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Sir David Attenborough interview: The one question about life that still baffles him
Isis publicly behead man in Syrian town square for 'insulting Allah' as he screams for help
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
9 reasons Greece's experiment with the radical left is doomed to failure
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...