Clydesdale Bank faces new crisis after record ‘mis-selling’ fine

Clydesdale Bank: What next after the latest scandal?

By Thomas Connolly

The Clydesdale Bank, one of Scotland’s biggest financial services’ employers, is in serious trouble with the regulator after being hit with a record fine over its mis-selling of “PPI” insurance, and how it handled complaints.

More than 90,000 customers are expected to receive compensation from the Clydesdale, which is now being forced to review no fewer than 180,000 previous complaints, having been served with a massive £20.7m for its behaviour.

The bank is effectively up for sale, although its ultimate owners, National Australia Bank, have indicated that they may attempt to raise up to £2bn via stock market flotation at an unknown date.

Jobs on the line?

Strangely, the Clydesdale’s predicament remains out of the political limelight in Scotland, while the various parties slug it out over opinion polls, dodgy economics and the credibility of each other’s election promises.

National Australia Bank wants rid of the Clydesdale, the bank it bought in 1987
National Australia Bank wants rid of the Clydesdale, the bank it bought in 1987

Yet the bank employs 4,700 people directly, and has become enmeshed in various banking scandals and catastrophic lending situations since 2011. While its core business seems stable, it is paying a heavy price for poor strategic decisions.

Flotation could mean massive cost-cutting, and ultimately a hostile or agreed takeover by another bank. Clydesdale remains in a weakened position partly because of its mis-selling transgressions. Founded in 1838, the bank is one of three in Scotland to retain the right to print its own notes, and remains an important part of the Scottish business community.

Yet it has been caught behaving dishonestly over the PPI situation, the latest in a series of scandals involving “mis-selling” – probably the most memorable euphemism of the financial crisis, as it actually means fraud.

Mis-selling – and mis-leading

Today’s fine is not only the result of mis-selling, but stems from the fact that bank staff actually mis-led the regulator in their original response to complaints, a damning fact that will be highly embarrassing to its board and owners.

It is known widely that the Clydesdale’s behaviour with private and business clients is contributing to a growing share of politicians’ constituency casebooks.

Before election hostilities began, one Holyrood MSP approached others on a cross-party basis to take up dozens of serious allegations and complaints from small business customers who were sold hedging products disguised as business loans over the last decade, to give one example.

Clydesdale, long seen as a steady if unspectacular consumer bank, came under pressure to build its business, following its takeover by NAB, which also owns the Leeds-based Yorkshire Bank. NAB wanted its UK banks to start behaving like their much bigger counterparts such as RBS and Llloyds, and to become more aggressive in new markets.

It is thought within the industry that the Clydesdale wasn’t equipped to compete on that bigger stage, despite moving aggressively into the small business, buy-to-let and commercial property sectors soon after 2000, and not long before those sectors faced collapse in 2008. Under pressure from Australia to divest, Clydedale has spent recent years backing out of those sectors, at great expense.

Thorburn: presided over the scandal years
Thorburn: presided over the scandal years

NAB has been trying to prepare Clydesdale to be sold, floated or broken up, as the Australians fend off criticism from investors concerned that its UK businesses as the financial equivalent of turkeys.

Chief executive David Thorburn – best man at the wedding of his former colleague and friend, disgraced RBS chief Fred Goodwin – stood down earlier this year. He was chief operating officer during the years of expansion and scandal, and his name appears on all current Clydesdale bank-notes.

Today his stand-in, Debbie Crosbie — keeping the CEO seat warm until the new boss arrives — apologised for the bank’s behaviour and said she and her colleagues would be doing everything possible to remedy the situation. It could take months, or even years, to settle the outstanding claims.

The Financial Conduct Authority believes that, by choosing to ignore certain paperwork, Clydesdale may have rejected more than 40,000 customer complaints, and may have underpaid compensation to 52,000 others.

The Bank that lied

The FCA decision states that between May 2012 and June 2013, Clydesdale “provided false information to the Financial Ombudsman Service in response to requests for evidence of the records Clydesdale held on PPI policies sold to individual customers.” In other words, it lied.

Clydesdale and Yorkshire Banks have so far set aside £806m to deal with PPI “mis-selling”. The insurance policies, seen as an “easy sell” for years by aggressive financial services companies, were supposedly providing cover for mortgage and loan repayments in the event of redundancy — in fact, most of the policies were unnecessary or would not apply to individuals such as the self employed.

The bank was previously fined £8.9m in 2013 after miscalculating the mortgage repayments of more than 42,000 customers.

It faces a growing scandal over it selling and handling of so-called “Tailored Business Loans” to small businesses, many of whom remain unaware that they were locked in to hedged products, often with enormous penalties. A growing group of customers claim that they were driven out of business by the banks’ swingeing terms and allegedly aggressive behaviour.

In a bizarre interview with The Herald in February, outgoing CEO Thorburn claimed: “I do feel very strongly I am handing the bank over in good shape to my successor and I do feel we have made good progress in building a better bank for our customers.” Said at the time to be “pondering his next move”, he has remained silent since departing the bank.

Last year he and Crosbie were challenged strongly about the bank’s behaviour when they gave evidence to the House of Commons Treasury Select Committee. The subsequent report published last month is critical of the Clydesdale’s so-called “Tailored Business Loans”, indicating that another scandal may be looming.


  1. Another scandal and one that could cost jobs in Scotland. The management of this bank should be brought to account and customers fully compensated. Their treatment of small business is another scandal and I suspect only the tip of the iceberg. Wonder what the bonuses were for selling all those dodgy loans and insurance policies?
    Newsnet is right, politicians should be paying attention here…

    • I left the commercial banking sector in the mid 1990s as they wanted me to stop being a bank manager and become a salesman, I refused and was shown the door – I have no regrets.

      The telling phrase in this piece for me was “NAB wanted its UK banks to start behaving like their much bigger counterparts such as RBS and Llloyds, and to become more aggressive in new markets.” The international aspect of banking and finance is what has created this monster which is likely to bring another financial crash soon. These mega-powerful organisations simply ignore National Governments. And National Governments are either unwilling, unable, or part of the clique so do not want to change this.

      The super rich are becoming richer, and nation states are suffering – see Greece for example. This can’t continue.

  2. I think this is a disgraceful piece, as vicious as it is ignorant.

    Fact: one small team within the bank was responsible for the actions resulting in the FCA fine.

    One small team. Senior management were not made aware of their activity.

    To trash the entire bank and the vast majority of staff who bend over backwards to provide the best customer service they can is utterly disgraceful.

    I have lost a large degree of respect for newsnet and some of its staff and managerment because of this wildly unbalanced piece.


    • Dear Cole, You’re entitled to your opinion, but let us consider a few facts:

      First of all we haven’t “rubbished” the whole bank, but its senior management and its owners, whose previous actions contributed to the current situation.

      You cannot seriously accept that this latest fine is the result of the actions of a small group? Of course that is the spin than every bank puts on these occurrences, but we are talking about more than 90,000 claim decisions and a review of 180,000 in total.

      The acting CEO herself said to the FT yesterday: “In 2011 we introduced changes to our policies and procedures that were designed to help us respond to PPI complaints. A number of these changes were inappropriate and have disadvantaged some of our customers. We got this wrong and I am sorry for that.” These were the actions of senior management, now a small group.
      Was a small group responsible for the PPI mis-selling? Was a small group responsible for misleading the Financial Conduct Authority? Was a small group responsible for designing and selling Tailored Business Loans to small business clients? Surely you do not believe that senior management had nothing to do with this situation?

      The Clydesdale and Yorkshire have had to set aside more than £800m in PPI compensation provision alone – a massive percentage share of their overall turnover. The Treasury Select Committee report of last month indicates more trouble for the Clydesdale.
      We are covering this story amid serious concern for the future of the bank and the majority of its staff who – as you say – work hard in their everyday business. But you make a mistake if you “shoot the messenger”, Newsnet, for what is a damning decision by the FCA.

  3. This report looks very fair to me, and doesn’t look like its “trashing” the bank staff at all, but pointing out the severe situation that the Clydesdale is in. Not sure why Cole is unhappy with Newsnet, unless he has a close relative in the bank or maybe has picked up something wrongly? If not, I suggest politely that he / she reads the item again – it looks perfectly reasonable to me to be honest.
    Good to see Newsnet Scotland covering important stories as well as politicians – keep it up please.

  4. thank you for this detailed report and for using the word which accurately describes what the bank was up to – fraud. Please keep reporting on such matters.

  5. I am sorry that again ordinary employees are in danger of losing their jobs when it is the criminals running the banks who should be losing their liberty, and their bank accounts emptied !!!

  6. It has been common knowledge within the (small) business community for several years now that Clydesdale Bank is ‘not to be trusted’ . We all have friends who have been on the wrong side of a TBS or whose BBMs (do we still have BBMs?) have tried to coerce them into a TBS by attempting to strong arm them into changing their already established loan terms….. Those who could afford to walk away from The Clydesdale Bank, including myself, have long since done so.
    It is encouraging to see that their criminal behaviour is at last being punished.

    • Who knows what it means for Clydesdale customers, but let’s assume it’s going to mean the bank has less money. So at a guess I’d say less services? Fewer branches? Fewer staff?
      For some customers of course it might mean that they actually get PPI compensation despite having been told they were due none due to the bank’s actions. I don’t know what it might mean for its business customers but it looks like theres a scandal brewing there too.
      This bank must be at some risk, and there is nobody to blame but its owners and senior management. Still amazed at Cole’s attack on Newsnet for reporting this (above), he or she should take off the blinkers to what’s been going on !!


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