Probe into risky deals flogged by bank staff
BanKinG giants are braced for a fresh mis-selling scandal after Lloyds was forced to shell out up to £80m for peddling risky investment deals to cautious savers.
The lender is writing to more than 7,000 customers who bought structured investments, which are complex products linked to the performance of the stock market.
an investigation by the Financial Conduct authority in 2015, prompted by a Money Mail investigation into sales practices at Lloyds branches, found there was an industry-wide problem.
The probe found that a number of Lloyds customers had been lured into taking out complicated investments when all they wanted was a regular savings account. The bank compensated those affected. This new investigation focuses on some of those products, as well as a whole raft of other Lloyds structured deals.
HSBC, Barclays and Santander have all sold the products in the past or sell them today, although none said they were aware of any issues yesterday.
Mark Brown, of Lloyds Banking Union, said: ‘The bank didn’t want to do a review. it’s only because of the Mail that this was picked up on and something was done. Other banks sold exactly the same products – so does it go beyond Lloyds? and is the FCa looking at other banks?’
Customers at Lloyds who were affected, including those in its investment arm Scottish Widows, were often older savers with a large stockpile of cash. They were offered deals including the acorn Market Linked Deposit and Protected Capital Solutions Funds, which in some cases saw investments of £10,000 locked away for years and ploughed into the FTSe 100.
although this can offer higher returns than a savings account, there is no guarantee on how it will perform – raising the risks.
Campaigners believe this was not made clear to customers.
The bank has reviewed 22,000 cases and is offering compensation to 7,250 customers who will be contacted by the bank.
a Lloyds spokesman said: ‘ We recognise that with some of our historic structured investment products we did not provide a small number of customers with sufficient information before making their deposits. We apologise for these errors. We are writing to these customers to explain their options and will ensure customers do not suffer any financial loss.’
The lender set aside £450m to deal with legal and regulatory issues last year, and it is possible the cash could come from this pot. Lloyds does not believe the bill will be as high as £80m, a figure suggested by its trade union.
an FCa spokesman declined to comment on whether the lender might also face a fine.
it is not the first to be hit with a structured products bill. Yorkshire Bank and Credit Suisse were fined a combined £3.8m by regulators in 2014. Justin Modray, of the consumer group Candid Money, said: ‘a lot of customers have unwittingly moved safe savings into products which are somewhat higher risk.’
The scandal comes just as big banks breathe a sigh of relief that the PPi mis- selling saga, which has cost them more than £40bn since 2011, is finally drawing to a close. a deadline for claims has been set in mid-2019. Lloyds fell 1.4pc, or 0.96p, to 68.7p.