Get tough on banks that mistreat customers

TREATING customers fairly should be the first requirement of a financial institution if it is to retain public trust.

In the UK and America, banks are under intense scrutiny for failing to attend to this most basic requirement. In the US, senior executives of the giant Goldman Sachs were grilled at a Senate committee hearing over allegations that it did not disclose to investors in one of its bonds that a major hedge fund manager involved in creating the product was betting heavily against it. It is a watershed case, not just for Goldman but for the US banking system.

Here in the UK, there are fresh signs of a much tougher approach by the Financial Services Authority. About time too. It is taking tough action against two banks over the poor way they handled customer complaints. After an investigation into the procedures at six banks, five have agreed to make "significant" changes to the way complaints are handled. And two are also being referred to the regulator's enforcement division for further investigation. Part of the problem was a poorly designed staff incentive scheme, which discourages staff from following through complaints.

Yesterday, it fined the London arm of Commerzbank 595,000 over its failure to submit accurate data on trading that could help detect market abuse. It is the fifth institution to be hit with a levy over transaction reporting. Banks are learning the hard way that rebuilding trust requires best behaviour.