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".

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
tennisLive: Follow all the updates from Melbourne as Murray faces Czech Tomas Berdych in the semi-final
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
Arts and Entertainment
Taylor Swift is applying to trademark song lyrics from 1989
musicYou'll have to ask Taylor Swift first
PROMOTED VIDEO
News
Joel Grey, now 82, won several awards for his role in Cabaret
people
Sport
Harry Kane celebrates scoring the opening goal for Spurs
footballLive: All the latest transfer news as deadline day looms
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness