Posts this month
A blog on financial markets and their regulation
Since the global financial crisis, policy makers and academics alike have focused attention on systemic risk, but consumer protection is an equally big if not bigger issue that has not received equal attention. John Lanchester has a long (6700 word) essay in the London Review of Books, arguing that the mis-sold PPI (payment protection insurance) scandal in the UK was bigger than all other banking scandals – the London Whale, UBS (Adoboli), HBOS, Libor rigging and several others.
Lanchester argues the case not only because the costs of the PPI scandal could go up to £16-25 billion ($24-37 billion), but also because it happened at the centre of the banks’ retail operations and involved a more basic breach of what banking is supposed to be about. Interestingly, the huge total cost of the scandal is the aggregation of small average payouts of only £2,750 to each affected customer indicating that the mis-selling was so pervasive as to become an integral part of the business model itself.