FCA warns banks to speed up compensation

The Financial Conduct Authority (FCA) has urged the UK's top four banks to speed up the compensation process when it comes to repaying firms that were mis-sold complex insurance hedging products under false premises.

Criticism aimed at the financial services firms included the suggestion that selling was incentivised through an inappropriate reward process and that sellers failed to accurately assess the risk awareness of potential customers.

The banks made large profits from selling these products, and have set aside £3 million in compensation for businesses affected by the scandal.

However, the FCA has revealed that the process is going extremely slowly - the banks have so far handed out £15.3 million or 0.5 per cent of the total sum, with only 125 offers accepted by customers.

Although take-up did increase in October, leading to hopes that the situation could be set to improve, there is nevertheless a feeling of annoyance that banks have not done more to meet their obligations.

"We gave the banks six to 12 months to complete their reviews from the start of the process and are frustrated that they are all expecting to meet the lower end of our expectations," the FCA said on its website.

Current trends suggest the organisations will not in fact meet the deadline set up by the regulator, so it has written to all four of the banks' leaders to work out the best way to speed up the compensation and deal with the situation moving forward.

This follows the news that banks will need to pay out some £1.3 billion to consumers who were mis-sold credit card insurance, with seven million people affected by this process.

If financial services firms are to regain their positive reputation, they need to carry out their compensation practices effectively, the FCA declared.