In November 2014, New City Agenda published the first comprehensive study into the efforts that retail banks were undertaking to change their culture. The report found that between 2000 and 2014 UK retail banks and building societies had set aside over £38.5 billion to pay compensation to customers. This meant that £1 in every £4 of pre-tax profits earned by the banks had been paid out in redress and associated administrative costs.
Among the top ten misconduct scandals Payment Protection Misconduct was by far the most expensive scandal for the banks. Poor advice and investment product mis-selling was the fifth most costly scandal for banks, as they paid out a combined £900 million since 2003. Among the banks fined by the FCA for misconduct was Santander who paid a £12.4 million fine for ‘serious failings’ in its advice arm back in March 2014.
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. In 2011, HSBC was fined £10.5 million for mis-selling investment bonds to elderly clients. Lloyds was fined £28 million over incentives offered to retail investment staff.New City Agenda said its research showed the need for shareholders to put pressure on banks and to play a greater role in changing bank culture.