Coming on top of the record fine imposed on Royal Bank of Scotland last week for the way that they handled complaints, it was announced yesterday that Barclays is to be fined £7.7m for selling inappropriate funds to people either close to retiring or retired. It's absolutely right that the bans should not be allowed to do that and that the consequences for banks that do should be significant. The £7.7m is only the tip of the iceberg for Barclays. It is estimated that it will cost Barclays up to £70m in total compensation to those customers who suffered as a result of the misselling. This is only the direct cost to Barclays, there will also be a knock-on effect of the loss of trust that the reports in the press and on TV will have on Barclays, which will lead to even greater losses of revenue. This comes at a time when trust in banks is at an all time low. This is not unique to Barclays and RBS, but is indemic across the industry.
However the staff in the branches who sat in front of customers and sold them these funds should not be blamed and should not be held to account for the misselling. As the banks battle for share of customers' decreasing wallets, branch staff are at the frontline of this war. Every product team within the banks wants to launch new products. Products that are effectively commodities i.e. exactly the same as every other banks, so the subtleties and details of the products become ever more nuanced to try and create some diffferentiation.
Meanwhile new regulations, new branch formats, new technologies all produce more change in processes and procedures that the branch staff must learn and the rate of change that branch staff must absorb gets higher and higher. Not only that, but branch staff are put under increasing pressure to hit sales targets and to demonstrate how productive they are, that the time for adequate training of staff is sacrificed due to all the competing demands on them. This is why this type of misselling happens. The banks need to be far more effective at recognising the level and speed that changes can be rolled out to the branches, to put in place systems that protect the branch staff from change overload and fatigue.
The role of the executives of the banks should be to protect the branch staff from taking on more than they can professionally do and why the responsibility for the misselling of products sits firmly with the executve.