The Spanish-based bank Santander have set aside £232 million for what they are calling “historic customer contact issues”, though they have not given any more details on what these issues might be. The bank has already lost £52 million from its profits this year afters its proposed purchase of a number of RBS branches fell through.
It is thought that this money represents what Santander believes it owes in compensation to customers that it has mis-sold products too. Payment Protection Insurance, or PPI, has been in the headlines a lot recently after the big banks managed to trick customers into paying for it when they had absolutely no use for it, but there are plenty other financial products which have a shady background too, and Santander appears to believe that these will have a light hone on them soon enough.
One of the reasons for this move may be that the Financial Services Authority is soon to be replaced by the Financial Conduct Authority, which will have much broader powers to get involved with the affairs of banks. There will be a particular focus on interest-only repayment loans, fee paying accounts and other sideline products which Santander has found hugely profitable.
Setting this money aside will eat heavily into Santander’s profits for this year, and it’s a sure sign that we’re not done with the torrent of financial scandals just yet. What’s less shock, of course, is that this may not be limited just to Santander, with Shore Capital’s Gary Greenwood pointing out that: “This is a very specific number. It would suggest Santander is fairly confident they are facing more compensation bills. It is entirely possible that other banks will have to follow suit.”
Of course, the big question is, if Santander knew they were in the wrong, why were they selling these products in the first place?