Fining Yourself

Can someone please explain to me the logic of fining the Royal Bank of Scotland? The bank has been undertaking some troublesome practices again.  The Financial Conduct Authority has found that more than half of the customers that the bank advised about mortgages, debt consolidation and the affordability of prospective mortgages were given the wrong advice. Presumably the advice was wrong for the customers but not wrong for the bank, and so the FCA has fined the bank £20.7 million with a discount of 30% if the banks pays the fine promptly. 

The bank is 80% owned by the state. The fine is paid by the state owned bank to the state. It is a bit like fining yourself and moving the money from one pocket to another pocket, or so it seems to me. The facts of the matter are made worse by the bank, having been alerted by the FCA to the fact that they were giving the wrong advice, took many months to put matters right – months when the wrong advice continued to be given.

Advice is an important service. Most people who give advice professionally need some qualifications and some standard of fitness and suitability, whether the advice is legal, medical or financial. People act on advice believing that the adviser knows what he or she is doing. It seems to me that instead of allowing the bank to move money from one pocket to another, the bank should have been prohibited from giving advice until it proved beyond doubt that it gave the right advice to its customers.

Mind you, there is another side to this story. Perhaps we can blame the customers from taking advice from the bank or indeed any bank. The history of banks in recent years includes fraudulently selling personal protection insurance, interest rate swaps, fixing the LIBOR market and manipulating currency rates as well as helping drugs barons launder their ill gotten gains. So having started this essay in one question I shall end it with another question. Who in their right minds would take advice from a bank?

2 Responses

  1. I think Mr B Obama takes banks’ advice all the time.

    • No doubt he has a personal interest in doing so.

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