Time to use the F word

It’s time to stop talking about mis-selling and give the activity its proper name – fraud.

Banks did not make unfortunate and unintended mistakes in selling products to customers who did not want them, did not need them, could not afford them – or in some cases did not realise they had them. It was an organised and deliberate policy.

Staff were trained in ways to foist these sometimes toxic products on customers and incentivised to hit targets. In the mildest cases bank staffs did not make clear to customers what was involved, or what the costs would be. In more extreme instances staff lied or deliberately withheld information.

These were not isolated incidents. The practice was industry-wide, with practically every bank involved. Yet no-one has been arrested or charged. The prosecution services in England and Scotland have not called for the papers. Surely there is enough prima facie evidence to suggest that the police should investigate?

This is not petty crime. So far the compensation bill for PPI alone adds up to £12.5 billion and the monthly pay out total shows no sign of tailing off. Add to that the hundreds of millions of pounds in fines levied by the Financial Services Authority and its successor, the Financial Conduct Authority, plus the fines and compensation for numerous other products, from interest rate swaps to investment schemes.

Have these penalties deterred the banks and made them go straight? No. As the £28 million fine imposed on Lloyds last week for persistent “mis-selling” shows, fines like these are a pin prick which will hardly be noticed. As the FT pointed out Lloyds’ retail division made a pre-tax profit of £1.64 billion in the first half of the year alone. How much profit did it earn by selling unwanted products to 700,000 customers?

Huge excess profits like these are the consequence of allowing Lloyds to achieve a dominant share of the personal banking market. It may be being obliged to sell off 600-plus TSB branches and RBS will have to dispose of over 300 Williams & Glyns branches, but the Big Four will still control 75% of the market.

No wonder investors aren’t putting any pressure on the Lloyds chief executive. The share price hardly moved after the fine was announced and is up 63% compared to a year ago. Monopolies are good for profits and, as I have pointed out before, no political party has the guts to break up the banks.

In Britain we don’t go in for television pictures of corporate executives being led away in handcuffs, as they do in the US, Spain and Iceland. The police even had to make an appointment with Rebekah Brooks to arrest her. But until António Horta-Osório of Lloyds, or one of his fellow bank chief executives, is pictured arriving at his local police station for questioning, there will be no deterrent and the “mis-selling” will continue.