U.K. Banks Seen Facing Decades to Tackle ‘Toxic Culture’Julia Verlaine
U.K. banks will need at least two decades to clean up a “toxic culture” that has cost them more than 38.5 billion pounds ($60 billion) in fines and compensation, Cass Business School said in a report.
Banks were forced to make provisions of at least 27 billion pounds to compensate customers for improperly sold insurance products from 2010 to 2014, according to the report commissioned by New City Agenda. The mis-selling of interest-rate hedging products has cost lenders 4.1 billion pounds.
“It has become clear that having an aggressive sales culture, which ripped-off customers, has cost banks dearly,” David Davis, a Conservative member of Parliament, said in the statement. “A toxic culture which was decades in the making will take a generation to turn around.”
British lenders have received some 20.8 million complaints since the financial crisis erupted in 2008, with the number of cases handled by the Financial Ombudsman increasing to about 400,000 from 75,000, according to the report.
Banks have seen tougher regulator scrutiny since the financial crisis forced the government to bail out Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. With lenders facing demands ranging from higher capital buffers to separating consumer operations from investment banks, “overcoming these issues is going to take a longer-term commitment to transforming culture within the industry,” Cass Business School said.
“The need for culture change has been recognized, but it has to be transmitted all the way from the top to the bottom of these huge organizations,” John McFall, a Labour member of the U.K. House of Lords, said in the statement.