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Virgin Money boss: banks found PPI habit hard to break

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Jayne-Anne Gadhia told the banking commission that when employed at Royal Bank of Scotland she wanted to pull PPI.

 

Banks could have withdrawn payment protection insurance from sale many years ago, the boss of Virgin Money said on Tuesday, but did not because they were worried about their profitability and their share prices. Hitting out against the "cartel" of the high street banking industry, Jayne-Anne Gadhia told MPs and peers on the banking standards commission that when she worked for Royal Bank of Scotland she had discussed with a "senior person" that PPI should be withdrawn. She left RBS at the end of 2006 after running the mortgage business to join Virgin Money which bought the branches of the nationalised Northern Rock at the start of the year.

 

But RBS did not step back from sales of PPI, which was sold with loans and is now costing the industry more than £12bn for mis-selling, because it did not want to be first to withdraw. She said that "nobody was prepared to be the first mover" because the share price and profitability would be hit. RBS withdrew PPI from sale in 2009 shortly after Stephen Hester was appointed as chief executive following the £45bn taxpayer bailout. Hester repeated his warning about the potential hazards of forcing banks to erect a ring fence between their high street banks and investment banks. He told a separate session of the committee that "when I look at the things that brought RBS to its knees they don't readily lie" inside or outside the ring fence.

 

More: http://www.guardian.co.uk/business/2012/nov/13/virgin-money-boss-ppi-habit-hard-to-break


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