Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
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banks then made the decision to provide for alleged PPI mis-selling claims. Barclays
announced in May 2011 that it would not appeal the court decision.
6.24 We accept that PPI was intrinsically a valuable product for some customers and that
the instances of alleged mis-selling were an industry-wide problem. But we believe
Barclays might have taken too much comfort from this and from the regulatory
involvement with the issues – and as a result was slow to address control failures.
We consider that:
― Given the level of customer complaints from 2005 to 2008, there should have
been more scrutiny of customer suitability;
― The high profitability of PPI should have raised questions as to whether this
was consistent with Barclays’ obligations to customers;
― Barclays was slow to deal with the emerging regulatory concerns;
― Barclays’ PPI sales force incentive schemes aggressively pushed sales,
potentially at the expense of customer suitability, until the schemes were
changed in recent years;
― Controls over the selling process could have been stronger – certain business
units were particularly aggressive, most notably FirstPlus (which ceased
making new loans in 2008), but also the retail bank and Barclaycard; 93
― The culture of the bank had developed into one which at times valued
meeting financial targets more than meeting customer needs.
Industry observation B: Retrospective interpretations
The industry has been vocal in asserting that regulators and others involved in
redress have sometimes developed and adapted their approach over time to
specific conduct issues, ultimately relating to the settlement of customer claims,
to the material disadvantage of the banks. We are not in a position to judge
whether this is a fair viewpoint. On occasions any such change in approach will
no doubt be justified by new information available to the regulators or be a
reaction to how the banks have themselves handled an issue. Effective
regulation, at its best, is based on mutual trust and respect. For this, it will be
important that, wherever possible, banks fully understand how the regulators
intend to approach issues and how any rules will be applied. Certainty is
impossible and consistency on the part of the regulator will, in turn, depend
upon the industry applying regulation in line with its spirit. This will, of course,
be assisted by the efforts of the banks to apply the highest standards of
customer care.
SME Derivatives
6.25 In June 2012, the FSA found that there were serious failings in the way interest rate
hedging products had been sold by Barclays, among other banks, to small and
medium-sized enterprises (SMEs) and required the banks to provide redress where
mis-selling had occurred. These derivatives sales had started around 2001, via a joint
93 Telegraph, “Barclays stops loans at FirstPlus”, 8 July 2008.