/ Money

Banks benefitting from bad behaviour is bad news

When banks are fined are the proceeds used to benefit consumers or spur banks to change their behaviour? No – the money goes back into the financial services industry, reducing the fee the banks pay the next year.

It’s been a vintage year for bad behaviour from the banking industry.

Barclays was fined £7.7 million by the Financial Services Authority (FSA) for mis-selling risky investment products to thousands of elderly consumers. JP Morgan was fined £33.3 million for failing to protect client money. And mortgage lender GMAC-RFC was fined £2.8 million for moving too quickly to try and repossess people’s homes. I could go on but you get the picture.

Better ways to spend money

You might be surprised to learn that all of this money is given back to the financial services industry, reducing the fees they have to pay the FSA the following year. So the woeful performance of the industry this year will result in a record discount, expected to be £79.1 million, for them next year.

There must be a better way to spend this money. Especially at a time when almost 500 Citizens Advice Bureaux debt advisers face redundancy and we desperately need to increase funding for financial education. Shouldn’t the money be spent on something which benefits consumers?

Loss of life savings

Argos was fined £17 million by the Office of Fair Trading for the price fixing of toys and games. This was twice as much as Barclays was fined for exposing thousands of risk-averse elderly consumers to the prospect of losing a substantial proportion of their life savings.

We need to see banks pay a larger financial penalty to make it appropriate to the offence.

Banks need to be forced to review their sales of products and compensate consumers. They also need to report information to shareholders about how much compensation they could pay to consumers.

It’s amazing that Lloyds TSB, the UK’s largest retail bank, is keeping its shareholders in the dark about how much it might have to refund to consumers if it’s forced to deal properly with complaints about Payment Protection Insurance.

Only when fines and compensation are high enough to strike banks where it hurts – their pockets – will they come under any pressure from their shareholders to treat customers fairly.

We will be arguing for changes to the legislation used to create the FSA’s successor. Then, hopefully financial penalties will be significantly higher and the money will be used for something which actually benefits consumers.


Here we go again, it appears to be the same old story – the banks seem to have the ability to ensure they are ALWAYS in a win/win situation! I certainly hadn’t realised that the fines actually resulted in banks paying lower fees to the FSA.
I guess that as always, even with fines being handed out, the banks will continue to ride roughshod over customers, the taxpayers and who ever else they choose.
Nothing matters as long as they are able to continue to make profits and pay themselves huge bonuses.
Customer service is non existent; interest on savings accounts is abysmal; mortgage lending etc bordering on an endangered species. Need I list any more? I can probably think of quite a few!
The only thing any of the banks appear to be good at is worming their way out of any complaints!

Sorry – will immediately jump back off my soapbox and return to quietly working away on my computer having finished my rant!

The Banking fiasco is primarily due to lack of regulation – I was disgusted that no penalties seem to be applied. It has certainly changed my view of Banks.

The G20 must decide to re-apply the regulations that kept the Banks on the straight and narrow – before Thatcher and Co decided to deregulate.

Jeff says:
2 February 2011

The problem is that the rules and laws are set by, and big businesses are run by, the smallest section of societies around the world who have no idea what it is like to not have enough money to live on.
It is clearly an “us and them” mentality that they have. They probably would feel hard done by if they had to curtail one or two outings a month eating out at a fancy restaurant. And they continue to totally ignore the fact that a large section of society can’t even afford to eat healthily or keep warm. Unfortunately the income gap between rich and poor is growing again.

So until this bunch of rich cronies stop twisting systems and creating fiddles to keep their bunch of chums happy and wealthy, or until they grow some compassion, then we will be stuck with a financial system that rips people off without any thought or shame.

John U says:
24 February 2011

Excellent comments Jeff. Sadly true. The power brokers in the world running governments, big business & commerce have no real idea how the common (wo)man lives. I wonder if they live on the same planet as the rest or vast majority of us!

Brian says:
3 February 2011

Surely when banks are fined the money should be given back to the people they have failed.
The fine should be calculated on the number of customers affected and the amounts they have lost (conned out of).

An example of how the public are duped into thinking companies are paying for poor practice when in reality the fines are meaningless. Somehow the cost is past onto the customers who lost out in the first place.

The fines should be used to compensate customers and should be paid for by company directors. Barclays directors can easily afford £7.7 million between them; this will make them personally accountable for the banks behaviour. They benefit from large bonuses when times are good (and seemingly also when times are not good), so they should pay when their poor behaviour is exposed.

Being sufficiently appalled at the pale imitation of new stricter rules and regulations on how banks should be allowed to operate, but I am even more appalled on finding out that the so-called fines for their unbelievably irresponsible business practices that have brought about this financial fiasco, are discounted to them for the following year’s fees to the FSA. And the rest of us, the bulk of the population, have to try and weather the fall-out somehow, and pay them for the privilege!!!

There is no question in my mind that the financial sector, big business (forget about the Big Society that they are conning us with) and the super rich, have a huge degree of control over most governments anywhere in the world.

So we have all these lowdown tricks to try and dupe the public and to lull us into thinking that something is being done about the near criminal activities of the financial world – a financial world which includes big business, the very rich, and many of those in government everywhere, and which has brought nearly the whole of the world to the brink of disaster. We like to think that our Western world is so democratic, but it seems very far from it when it is the ordinary people of a country who have to pay for the unbridled greed of the few.

Damian says:
29 June 2012

Corruption, corruption….I say again, corruption! It’s a classic case of the wealth of the many in the hands of the few! No wonder this Great Britain of ours is so absolutely ruined! It’s a madness to think we can trust the profiteers that are supposed to keep our hard earned money safe! How on gods green earth do we the people of this country let this happen? Time for a change, I wonder what would happen if at least half of the customers of these banks would turn up on one day and withdraw their funds? That would be the only way to hit them where it hurts! Would that ever happen I wonder? We’re all a bit more concerned about putting food on our table than to create a run on the banks! We’re right where the powers that be want us, tired under-paid and over-worked. The best we can hope for is to lobby the FSA to throw a few scraps to the struggling schools, hospitals and other organisations that actually matter!! I’m absolutely disgusted!