The Banking Standards Commission has heard that Lloyds Banking Group's payment protection insurance profits were so critical to the viability of its personal loan business that "it was not a standalone product," according to Helen Weir. Yet the bank hadn't considered that people might repay the loan early and that the insurance should therefore end at the same time. She claimed some customers asked for the product in focus groups "because it gave them peace of mind". Yet the claims ratio as share of premium was lower than comparable products (20-50% vs 60-65% for life or property insurance, and higher for motor insurance).
Carol Sergeant, then Lloyds' Chief Risk Officer, and formerly the FSA managing director who led the investigation into Lloyds' mis-selling of precipice bonds (now the Treasury's adviser on the doomed 'simple products' intiative!) said:
'I feel I bear accountability for not taking up with the FSA more clearly at the outset what principle’s based-regulation meant in the conduct area. ‘I made the wrong assumption, because it worked in other parts of the forest that we would know how it would work and as time goes on by continuing to address the various issues that were coming out of thematic reports I thought that this [mis-selling problem] could be mended.’
This from a former managing director of the FSA who, I repeat, led an investigation into Lloyds' mis-selling of precipice bonds...
Is this the kind of future that Hector Sants faces, having been knighted on his way from CEO of the FSA to leading up Barclays' compliance function?