Watchdog tears strip off banks

NEW Financial Services Authority chairman Callum McCarthy warned banks that their sales forces had 'too often acted irresponsibly' and that in future the watchdog would 'use enforcement powers actively' on offenders.

He said banks' senior management must take responsibility to ensure that inappropriate products were not sold and that staff incentives rewarded responsible behaviour. Too often, he said, this had not happened.

Failure to meet basic standards is 'unacceptable', McCarthy told a British Bankers Association conference. He warned that the FSA, where he took over in September, will 'place a new emphasis on the way banks treat their customers'.

Separately, Barclays' incoming chief executive John Varley joined the chorus of alarm over rising consumer debt, warning that last month's quarter-point interest rate rise would prove the 'financial Nemesis' for some.

Varley, formerly the bank's finance director, added that supposedly reassuring figures for average debt burdens mask a serious problem for some sections of the population. And he warned: 'Don't be seduced by the averages.'

Varley said Barclays has been carefully avoiding risky debts, especially in mortgages where loan values are 'racy'.

Among many of the bank's rivals the risk of debt defaults 'has risen quite sharply'. He warned of a possible 'firestorm of provisions'.