MSE News: Santander fined £1.5m over investment cover uncertainty

A £1.5 million fine is the equivalent of a slapped wrist by todays standards. As much as it pains me, you do have to feel a little sorry for Santander as prior to the credit crunch the FSA, FOS and FSCS didnt know that these products were not protected under the FSCS. It took a lot of debate and legal work to decide that they were not. The credit crunch has seen many companies change their documentation with regards to FSCS or even change the methods in place to make sure the protection is adequate. A few will get fines. Most will not.

First thoughts are that the penalty should be no less than, and preferable several times the levy the FSCS would have charged if these products had actually been eligible for cover. £1.5M seems totally inadequate in that regard.

Second thoughts are that FSCS probably did receive the usual levy (the products were partially covered in limited circumstances such as mis-selling), its just that the FSCS cover was totally inadequate for the ordinary customer. FSA have publicly admonished Santander, and the humiliation at getting it wrong should be enough so the size of the fine doesn't matter much. Except that

It is easy to believe that Santander gained a lot more than £1.5m from even a small proportion of the £2.7bn sales where people wrongly believed the FSCS was backing their investment (£1.2bn sales whilst Santander definitely knew it was wrong). The FSA's explicit aim of the fine having a significant deterrence effect is wishful thinking on their part.