In a recent opinion article for the Financial Times, author and former banker Philip Augar analyzes cultural shortcomings in the UK financial services sector and suggests that banks need to reform their culture practices before making the case for easing regulation.
The UK's motor finance scandal is an example of continuing cultural shortcomings, Augar argues. The Court of Appeal recently ruled that car dealers had to disclose commissions on motor loans upfront, addressing a practice previously buried in small print. This ruling exposed banks to potential compensation costs of up to £30 billion and highlighted parallels to the £50 billion payment protection insurance (PPI) mis-selling scandal.
Despite claims of progress since the PPI scandal, responses to the ruling revealed that systemic issues persisted. Santander delayed reporting results to assess the implications, while Lloyds and others reexamined the funds they had set aside to cover related costs.
The sector's decision to dissolve the Financial Standards Culture Board in 2023 underscored its insufficient focus on reform, Augar writes. He calls for boards to prioritize customer value over shareholder profits to rebuild trust, avoid legal challenges, and reduce financial risks. Without a cultural shift, the industry's reputation and stability remain at risk, he argues, undermining consumer trust and growth objectives. "It is in everyone's interests — banks, customers, investors and the government's growth agenda — that the sector gets this right," Augar concludes.
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