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 Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
- 2 Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
- 3 Sussex couple die in suspected Christmas Day 'suicide pact'
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 The Unluckiest People of the Year 2014 (and one very unlucky giraffe)
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...