King: Banking needs culture change
Published 29/06/2012 | 07:42
The Government is facing mounting calls for an inquiry into banking culture and practices after a fresh mis-selling scandal capped a nightmare week for the industry.
Bank of England Governor Sir Mervyn King launched a scathing attack on the banking industry and demanded a "real change in culture" as Britain's lenders became embroiled in more controversy.
Opposition leader Ed Miliband pushed for a probe to "shine a light" on the industry after the FSA uncovered "serious failings" in the sale of complex financial products to small businesses, just days after the rate-rigging affair emerged at Barclays.
Taxpayer-backed Royal Bank of Scotland also confirmed it was being investigated for manipulating the rates at which banks lend to each other, known as Libor.
Meanwhile, RBS boss Stephen Hester waived his 2012 annual bonus following the IT fiasco that caused major problems for thousands of NatWest customers.
Sir Mervyn said he believed a Leveson-style inquiry was not needed, but slammed conduct in the industry. He said: "From excessive levels of compensation, to shoddy treatment of customers, to a deceitful manipulation of one of the most important interest rates and now news of yet another mis-selling scandal we can see we need a real change in the culture of the industry."
The Financial Services Authority (FSA) revealed earlier that Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group had agreed to pay compensation to customers who were mis-sold interest-rate hedging products. Some 28,000 of the products have been sold since 2001 and may have been offered as protection - or to act as a hedge against a rise in interest rates without the customer fully grasping the downside risks.
The findings come after Barclays was fined £290 million by UK and US regulators for manipulating the rate at which banks lend to each other, and echoes the costly payment protection insurance (PPI) mis-selling scandal that emerged last year.
The Treasury has started to look at strengthening criminal sanctions for those responsible for market abuse after the FSA exposed the dealings at Barclays on Wednesday. Serious Fraud Office investigators are in talks with the regulator over the scandal, while pressure is mounting on Barclays chief executive Bob Diamond to stand down.
Asked whether Mr Diamond remained the right person to run Barclays, Prime Minister David Cameron said: "I can't say that. As I say, he has got questions to answer." He added: "People are rightly angry about the behaviour of the banks and so am I."