Fixing the broken financial services model
6th July 2015 | Chris Alder
How can sales survive in a banking sector beset by scandal?
Interest rate hedging products where businesses were mis-sold complex insurance deals… tax dodging… manipulation of the London interbank lending rate (LIBOR) to boost profit from trades… money laundering… the manipulation of foreign exchange rates by out-of-control rogue traders – these have been the scandals which for many have come to characterise a broken financial services industry.
But it is the scam which saw customers mis-sold payment protection insurance (PPI) policies that has proved to be the biggest banking scandal in terms of the number of people affected. Since the 1990s, millions have been bamboozled into buying PPI to pay off loans or mortgages if they died, became ill or lost their job. The only problem was that the policies were not fit for purpose. Banks alone are thought to have paid out around £22 billion in compensation since the affair came to light.