Managing director of the FSA, Martin Wheatley, has said that there are still unresolved issues relating to how customers are treated across financial services.

Mr Wheatley was speaking at the Chartered Institute of Bankers in Scotland and said that many of the lessons of the crisis had been learned, but that there was still much to be learned to improve the way customers are treated across the financial services sector.

“We are working hard to get our regulation ready in time for the new regulators and we are building our understanding of what drives consumer behaviour, and banks’ business models. We need boards of firms to do the same, and for banks to rebuild confidence and trust by putting their customer back at the heart of what they do.”

The FSA will be replaced by the Financial Conduct Authority next year and is now developing the new approach that the FCA will take to regulating the way that firms treat their customers.

“In order for our regulation to work better than before, we need to understand why people make mistakes and why firms do what they do.  So we are looking at consumer behaviour, and business models in firms to inform our new, more forward looking and intrusive supervision, and we will be expecting boards of firms to play their part too.”

The FCA will look at what is behind the economic decisions of individuals and the firms it regulates. It will take into account the wider economy, the challenges facing banks in their search for profits, the pressures on consumers facing tougher times ahead and economic uncertainty today.

And it will follow the money to understand what lies behind profitability and the implications of firms’ strategies.

“In all of this, we accept that firms need to be able to generate acceptable returns for shareholders, and have to be financially robust.  But this is about ‘good profits’ rather than profit at any cost — either to firms’ own stability or their customers’ best interests.”

“The key point is that in the FCA, we will be looking to firms to construct business models where fair treatment of customers is central.  And we will expect those in executive management and on the boards of firms to step up their engagement with this side of the business and take this seriously.”

“Because not only will we as a regulator need to understand your business better, boards will need to do the same, and they, like us will need to ask tougher questions.  We have to ask why boards of banks did not ask the management of firms about how things like PPI could be so profitable – 15% of some banks’ profits – and still deliver the fair treatment of customers.”

Looking to some of the current issues that the FSA is dealing with, including customers’ requests about payments to the sale of a complex product to a small business – people do not feel their banks are not putting their interests first.

“So that although we have all – I think – learned the lessons on the prudential side of banking, and banks are now far more financially secure and stable, with better risk management and preparation for what might lay ahead.  We are not yet in that place on the conduct side.”