Sin Bin: UK banks take £880m hit over investment advice scandals

Almost £53bn was spent by the largest UK retail banks to pay for their misconduct across all products between 2000 and 2015, the report said.

New City Agenda said: “Banks failed to properly assess a consumer’s attitude to risk or capacity to withstand investment losses. Commission-based advisers in the banks pushed consumers into poor quality or risky investment products.”

In particular, the think tank said complex structured products were among the missold products by banks, which “under-played the risks or exaggerated the potential returns”.

Investment products and advice misselling was the fifth most costly scandal for banks, while PPI misselling topped the list with £37.3bn for the same period.

The report says the profitability of UK retail banks has been “imperilled by persistent misconduct” in recent years.

A number of banks have been fined by the regulator over conduct in their advice divisions since 2003.

HSBC was fined £10.5 million for mis-selling investment bonds to elderly clients, and Lloyds was fined £28 million over incentives offered to retail investment staff.

Santander UK was fined £12.4m by the FCA in March 2014 for failings in its investment advice arm. Since then the bank set aside £45m for investment advice mis-selling claims.

Banks also set aside £600 million to cover pension mis-selling between 2000 and 2002. This was mostly related to advice given to transfer out of company pension schemes.

Lloyds, which recorded a £117m fine for PPI costs in June 2015, paid the highest amount for misselling scandals at £14bn between 2010 and 2014, followed by Barclays at £7.3bn, according to New City Agenda.

The report added: “The 2014 and 2015 results brought a wave of additional provisions for Payment Protection Insurance, investment product and packaged bank account misselling and breaches of the Consumer Credit Act. Just over a year later the total costs have increased to almost £53bn.

“The scandals covered a wide range of products and practice. But key root causes of these issues include poor quality products, inappropriate staff bonus schemes and an aggressive sales-based culture.”

New City Agenda said its research showed the need for shareholders to put pressure on banks to reveal ‘what skeletons remain in their cupboards.’