Our Watchdog not Lapdog campaign called for the new financial regulator to be strong, open and proactive. Martin Wheatley must stick to his plans for tough action – even if it’s unpopular with the bankers.
In the past, the approach of the Financial Services Authority (FSA) can be summed up in one word – ‘weak’. When a sofa shop like Land of Leather mis-sold financial products, the FSA went after its chief executive, but let the senior bankers get off scot free.
Other regulators seemed to take a much tougher approach. The Office of Fair Trading fined Argos and Littlewoods £22m for price-fixing of toys, action-men dolls and games. This was more than twice the maximum fine levied by the FSA for mis-selling.
It’s great that Martin Wheatley, the chief executive of the new Financial Conduct Authority (FCA), has been talking tough. But regardless of the furious lobbying of the banks, he needs to follow this up with action.
Don’t be afraid to fine the banks
The new regulator, which gets to work next month, must be quicker to stop banks selling toxic products. It must name and shame firms when they issue misleading financial promotions. But in a speech said to ‘anger’ the banks, Martin Wheatley said this week:
‘The absolute level of fines, you could put them up three times or five times, but it would not make much difference unless individuals are held to account.’
At Which?, we think fines need to be far higher. Only when banks take the hit will the shareholders ask banks more questions about how they’re treating customers or how they’re dealing with complaints.
As acknowledged by Martin, the FCA will also need to do more to hold individual senior bankers to account. Our Big Change campaign calls for proper professional standards and for senior bankers to face greater sanctions.
Where should the money go?
At least now the revenue from these fines goes to the taxpayer, rather than being given back to the banks in lower fees the next year. In his 2013 Budget, the Chancellor announced that some of the fines levied for manipulating Libor will go to Christmas boxes for troops serving abroad and to the charity Combat Stress – which helps veterans suffering from mental health problems.
Of course, fines alone won’t be enough to change the culture of the banking industry. We’ll also need simpler products and more effective competition. But surely the FCA should at least review its policy on how it calculates the fines levied on the banks and bankers to hit them in the pocket when they mistreat customers. We want a financial regulator with teeth, don’t we?
Do you think increasing the level of fines will lead to better behaviour from banks? What do you think the fines from the banks should be spent on?