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UK watchdog still sees poor sales practices at some banks
March 4, 2014 / 10:51 AM / 4 years ago

UK watchdog still sees poor sales practices at some banks

* Watchdog sees progress in ending poor sales practices

* FCA says won’t make further rule changes for now

* Says too early to say if culture at banks changing

By Huw Jones

LONDON, March 4 (Reuters) - Some of Britain’s banks are still offering their staff pay incentives that could trigger more mis-selling of financial products, the country’s markets watchdog said on Tuesday.

The Financial Conduct Authority (FCA) said significant progress had been made in stamping out poor selling practices, but found around one in 10 of the companies it examined still had risky sales practices.

The issue of mis-selling remains sensitive in the wake of a series of scandals. UK banks have for instance set aside more than 20 billion pounds ($33.4 billion) to compensate customers for mis-sold insurance on loans such as mortgages.

The FCA fined Lloyds Banking Group Plc 28 million pounds last December for the way it encouraged staff to sell 2 billion pounds of products that customers may not have needed. Incentives included a change to win 1,000 pounds, known as a “grand in your hand”. Another was called the “champagne bonus”.

Britain’s regulators published a review of selling practices in September 2012 and on Tuesday unveiled results of follow-up checks that looked at 400 firms, nearly 800 incentive schemes and 12 company visits.

FCA Chief Executive Martin Wheatley said it would take time to see if improvements seen so far become part of a genuine cultural change or whether other pressures put on staff replace sales incentives with the same harmful effects.

The watchdog’s follow-up work found banks were not checking for spikes in sales by individuals, which can be a sign that poor sales practices are being used.

Face-to-face sales conversations were also being poorly monitored in some cases and some firms were failing to recognise that pay wholly linked to sales increases the risk of mis-selling.

However the FCA was not planning any further regulation for the time being. “Given the progress made, we are not proposing any changes in our rules at this time but financial incentives will remain on our agenda in 2014,” the watchdog said in a statement.

The FCA was launched in April 2013 with a remit to protect consumers after several mis-selling scandals spanning years, from endowment mortgages to pensions.

In April it will also start supervising thousands of consumer credit firms and will be checking their sales practices.

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