Analysis: Penalised Yorkshire Building Society sets aside £12.7m for fine and compensation

PUBLISHED: 11:54 25 July 2014 | UPDATED: 13:32 25 July 2014

Chris Pilling chief executive of Yorkshire Building Society

Chris Pilling chief executive of Yorkshire Building Society


Yorkshire Building Society (YBS) has set aside £12.7m to pay compensation claims and fines after it was rapped over the knuckles for misleading customers.


The financial sector has endured a bruising to its reputation that has been unprecedented in recent history.

Despite efforts from the government to save the banks from the financial crisis, the scandals have continued to come thick and fast, with businesses and consumers feeling the sharp end of the misconduct – from rate rigging and PPI misselling to interest-rate swaps. But while the last seven years may have been a bad time for anyone with a bank account, there is one area of the financial sector that has benefitted – the mutuals.

With their customer-owned ethos and non-for-profit model, building societies have positioned themselves as a trusted alternative to the banks where money is safe. No one has advocated this opinion more than Chris Pilling at the Yorkshire Building Society (YBS) who has pointed to their customer satisfaction record as a clear sign that their members remain at the heart of their business. It is with a great deal of unease, therefore, to see YBS penalised by the FCA for misleading customers over structured deposit accounts.

However, we should not be quick to tar building societies – including the YBS– with the same brush as the banks. What it does do, however, is provide a strong wake-up call to YBS to get their house in order.

The Financial Conduct Authority hit YBS Group with a penalty of £1.4m last month for not being clear with customers over investments in structured deposit accounts that had little chance of achieving maximum returns.

Yesterday, the mutual said it had learned from its mistakes and was close to sending out letters to redress customers which had invested in the schemes.

Chris Pilling, chief executive of the YBS Group, who admitted to investing money into the accounts himself, said YBS continued to have record of customer satisfaction that was significantly better than the big banks.

It comes as the YBS – a group of mutuals including Norwich & Peterborough (N&P) – revealed significant gains in its interim results, as operating profits rose 30pc to £107.5m.

Mr Pilling said: “We work in a complex industry and from time to time things do go wrong, but it is the values of the organisation when it comes to putting it right which sets us a part from other organisations like the banks.”

“I am pleased to say that the FCA themselves said that the way we sold the product was good, but they had a problem with the literature,” he added.

The fines from the FCA centred around a product called Cliquet designed by Credit Suisse International (CSI) – which was also hit with a £2.4m fine – and sold to nearly 84,000 customers who ploughed in £797m.

Mr Pilling said that he had invested money for his children into the structured deposit accounts because he believed in the product.

Meanwhile, The YBS group’s interim showed that lending rose 50pc in the first six months of the year, while net lending grew 179pc to £1.3bn.

The performance was partly boosted by the success of the N&P, which continued to grow both its mortgage lending capacity and its customer base linked to its current account.

He added:“We have successfully delivered in our core business areas – completing more than 16,000 mortgages, opening more than 100,000 savings accounts at a time of historically low interest rates, growing the N&P current account customer base and continuing to provide no-obligation financial advice for all across our branch network.”

Do you have a business story for the Eastern Daily Press? Contact business writer Ben Woods on 01603 772426 or email

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