Ex-HBOS chief: Payouts for mis-sold insurance are mad

A former director of a failed high street bank has described levels of compensation paid to victims of payment protection insurance as “mad.”

Sir Charles Dunstone, who chaired the retail risk committee at HBOS between 2006 and 2008, said banks had “surrendered” to pressure from the Financial Services Authority by putting aside £11 billion for compensation to customers.

He told a panel of the Parliamentary commission on banking standards: “I don’t think the policies were mis-sold as the FSA says they were.”

The comments are certain to anger customers who were wrongly sold discredited PPI insurance policies, which were supposed to cover loan or credit card debt repayments in the event of illness or unemployment. Sir Charles, the founder of Carphone Warehouse, was a non-executive director of HBOS in the run up to the banking collapse of autumn 2008.

HBOS was forced into a rescue merger with Lloyds TSB when it became clear it was about to collapse. The merged group was propped up with £20 billion of taxpayer support.

Sir Charles also told the panel he was “surprised” by the extent of the losses incurred by HBOS’s corporate lending arm.