UK financial mis-selling was caused by short term bank bonus goals

A pay scheme expert has predicted that the spate of mis-selling scandals in the UK was caused by the banks’ bonus scheme being tied to only short term goals.

The principle incentives strategist for the independent company Xactly, Erik Charles told International Business Times UK that it was not surprising that a number of banks found out that their staff had mis-sold thousands of financial products to customers, because the incentive schemes they put in place encouraged it.

Charles said “Bonuses with short term goals that are paid quarterly or annually not only encourages mis-selling but it also doesn’t do much for the long term productivity or health of a bank.”

Working on behalf of a range of companies of all sizes and industries, Xactly is a software firm that provide research and insight into optimal incentive competition programmes, whilst also motivating staff through performance management.

In total, banks have set aside a staggering £20 billion to tackle the Payment Protection Insurance (PPI) scandal. This is just one of a range of financial products that have plagued the UK banking industry over the last few years.

Originally, PPI was designed to provide loan repayment cover, should the customer fall ill, lose their job, or be involved in an accident. However, millions of customers were sold the policy when they didn’t, ask need or want it. This has therefore meant that many unhappy customers have submitted complaints to their relevant lender.

Banks and other financial lenders have taken months or even years in some cases to rectify their mis-selling mistakes to each customer, due to the complexity and individuality of each case.

 

Posted on Fri 23 May 2014