Matthew Bullock Norwich & Peterborough on Keydata Compensation

Matthew Bullock Chief Executive at the Norwich and Peterborough Building Society talks to the BBC’s Andy Gall about timescales, and about the likely factors affecting the level of compensation to be paid out to investors in the failed Keydata product, and reassures the Members that any final order would be manageable from their resources. Broadcast at 08:19 on Friday 27th August 2010 in the Peterborough Breakfast Show on BBC Radio Cambridgeshire.

AG The Norwich and Peterborough Building Society says any compensation on Keydata products will not be on a scale to threaten its independence. Last week the Financial Ombudsman rule that N and P should repay twenty eight thousand pounds to an elderly couple after mis-selling them products from the collapsed investment company. They’re appealing as part of the ruling and Matthew Bullock is Chief Executive of the Norwich and Peterborough and joins us now. Good morning Matthew.
MB: Good morning. … (BANTER)
AG: So you’ve been reassuring customers this week. What’s the worst case scenario then?
MB: Right. There are two great uncertainties in this issue. The first uncertainty is what was the risk in this product. How risky was it, if people are saying we mis-sold it, and that’s what the Ombudsman said in this case. You have to take a view on the risk of the product. And that’s a discussion which we’ve been having with the FSA, who are the regulators, and FOS have been involved in these discussions. And that’s a discussion which unfortunately has been delayed by the FSA for two and a half months. And we can’t go forward until we actually have had that discussion. So that’s one area of uncertainty. The FOS view, the Ombudsman’s view, was that it was a hundred per cent risk. We don’t think that’s the case, and that’s an honest commercial argument that we have to have.
AG: Well you hope it isn’t the case as well because ..
MB: Well I think we actually .. we looked at the product and I think we looked at it carefully, and that’s our view. And we’re told the FSA will be ready for that discussion some time towards the end of September.
AG: It could be a watershed moment though, couldn’t it?
MB: Well .. then the other big uncertainty here .. so that’s one. The second big uncertainty is whether the investments are worth what they’re worth. Now what the view that was expressed by journalists was that they were worth nothing. And we don’t .. we’re pretty sure that’s not the case. So you have on the one hand you can say if they’re a hundred per cent risk, and they’re worth nothing, then the figures would be large. If the figures are less than a hundred per cent and not worth nothing then the figures of that are smaller.But let me just say on either account, even if it was a hundred per cent, and nothing, there will be nothing that should be concerning our members and our savers about us, because we have the reserves. We can absorb even the worst case scenario.
AG: And do you know what the worst case scenario is?
MB: Well I know what the worst case scenario could be. If you said that it was a hundred per cent was mis-sold and the bond’s wortth absolutely nothing, it could be about fifty million pounds. But from our point of view we’re not .. we’re a very well capitalised organisation, and that would be within our resources to absorb. But i don’t think it is that figure, and the question is what is the figure. And until the first uncertainty and the second uncertainty are resolved, and I have to say we’re working incredibly hard trying to resolve them, we don’t know what the number will be. In the meantime ..
AG: When do you find out the results of the appeal?
MB: Well the Financial Ombudsman Service have said they will wait until the discussions that we’re waiting for the FSA to have with us are concluded, I understand. So they’ve indicated that they won’t finalise their view until the end of September as well. And in the meantime it could be that the Financial Services Compensation Scheme who are the governing body set up to recompense investors in general if there has been fraud or some other kind of crime involved here, then they have also said by the end of September they will reach a determination on whether they’re going to pay compensation.
AG: Matthew, as I was touching upon earlier, it could be a watershed moment. the whole landscape of financial advice could change and how we understand it. People could become much more circumspect ouldn’t they?
MB: Well I don’t think this is a watershed moment. I mean I think that’s wrong. I think that that’s overplaying what the issue is, what the kind of overall issue is. I think that it is clear that investors, perticularly following the financial crash, are concerned about finance, and we are very intent on showing that there is value in what we do, and that they don’t need to be as concerned. But I think that what we’re .. unfortunately sometimes removing these uncertainties, particularly in such a tangled case as this, just takes time. And we have realised that we had to give people some reassurance, some support, across that period. That’s why when we made the move in early June .. July to make a loan available to all our Members, to make sure that nobody’s out of pocket at the present time, and we said we would continue that until the end of this year. And certain things have happened in the last few days which make me feel reasonably confident that this thing will be resolved and people will be able to know where they are, and hopefully feel good about things, by the end of the year ..
MB: .. probably by the end of September. But I just .. it’s not in my hands entirely, and we’re working very hard to bring that to fruition.
AG: Matthew, thank you very much for talking to us. That’s Matthew Bullock Chief Executive of the Norwich and Peterborough.