British banks face yet more bills, this time for poor advice to customers

HSBC has set aside US$149 million to review how it advised about 200,000 British customers on investing a lump sum of money, the first British bank to do so and signalling another potential costly mishap for lenders.

HSBC chief executive Stuart Gulliver said on Monday about US$120 million of the money set aside will pay for the cost of its review, indicating only a fifth of the provision had been earmarked for customer compensation.

It follows a “mystery shopper” undercover review by Britain’s financial regulator that checked on investment advice at six major lenders. Among the findings, released in February, were that unsuitable advice had been given 11 per cent of the time and that firms did not gather enough information in a further 15 per cent of cases.

One of the companies was put under investigation for possible investment advice failures, which could result in a fine. That firm was Santander UK, four industry sources said at the time.

HSBC is the first bank to specifically set aside money for the issue, included in its third-quarter results.

“The Financial Conduct Authority [FCA] has said that suitability failures have been widespread in the industry, so it is unlikely that HSBC are alone,” said Rob Moulton, a partner at law firm Ashurst.