The mis-sold PPI scandal was immense enough for Europe to take notice. The Financial Conduct Authority and the government’s actions became the continent’s basis for its Insurance Distribution Directive (IDD). The latter was to ensure regulators had enough powers to intervene and tamper with financial frameworks that can lead to potential mis-sold PPI-level scandals.
The FCA’s responsibilities are now extended to resolving possible banking issues before they happen. The watchdog will achieve this by using big data and analytic information that can show signs whether a possible flaw or loophole in a framework can happen.
The then-Financial Services Authority lacked the powers to investigate and look through every aspect of banking systems. This lack of authority had led to the implementation of troublesome incentives systems. Because higher work volumes can mean great bonuses for themselves, employees used unscrupulous sales tactics, such as presenting PPI as a necessity to customers, putting victim payments in jeopardy. In fact, the industry earned £2 billion yearly from mis-sold insurance policies.
Today, banks have lost almost £40 billion refunding consumers mis-sold payment protection insurance. About half of this amount had been returned. However, with new powers and tangible data that can show objective signals of a possible financial scandal in the future, UK’s watchdog can definitely prevent a future financial catastrophe.