Matthew Bullock Norwich & Peterborough on the Keydata Decision

AG: There’s been a breakthrough for investors who lost savings in the collapsed firm Keydata. Many bought their plans through the Norwich & Peterborough Building Society, and yesterday the Financial Ombudsman ruled in a test case in favour of a retired couple who lost twenty eight thousand pounds. He said the Norwich & Peterborough had mis-sold the plans, and exposed their customers to inappropriate risk. And Matthew Bullock is Chief Executive of the Norwich & Peterborough and joins us now. Good morning Matthew.

MB: Good morning.
AG: Is this a .. so obviously .. alarming was my first response to this, that you selling something, or .. were you .. what’s the semantics here? Did you advise or did you sell?
MB: Well we’re advisers, and we talk to people about the risks, and in this judgement .. this judgement is a provisional judgement, and we have some issues with it, which we are discussing further with the Ombudsman, not to do with the couple involved, but to do with some of the technical comments he made.
AG: Well you’ve advised over three thousand people to invest in Keydata didn’t you?
MB: Yes that’s right. And we clearly want to make sure that in any judgement he reaches, we agree on the technical analysis that’s he’s made of the product risk. And he made some comments there which we don’t actually think are correct, and so we’re asking for a further view of it. And this decision, the final decision won’t appear until some time in September.
AG: This could be a big watershed moment really, in the world of finance ..
MB: Well …
AG: .. in that people advise people all the time.
MB: They do indeed. And I think from that point of view if the judgement goes in this kind of way then we’ll clearly have to look at cases, and decide whom we think was misadvised and who wasn’t. And clearly from that point of view that will take some time. But I think that what we’re .. we’re slightly tied here, because the whole orchestration of the discussion of these cases is in fact being run by the FSA, not the Financial Ombudsman Service. And our hands are tied, because the discussion about the technical issues here is really under the FSA’s hands.
AG: But this gets a bit fogged though, doesn’t it, for people listening this morning.
MB: I’m afraid it does. It fogs us too, because until we can .. we’re part of a bigger process, and this in a sense has come out the side before people have finished the process. And that’s a difficulty in the FSA who in fact encouraged us to apply for a waiver which will slow everything down again.
AG: But that in itself to one side for a moment, does this not mean that if this case is a case that will be repeated over and over and over again, in that if you advise somebody to buy into a certain product, and that that product fails, then you’re culpable, does that not mean that people like yourself …
MB: Well no that’s … you’ve jumped. Just because you advise somebody and the product fails doesn’t mean to say you’ve mis-sold it.
AG: But it does mean .. it could mean that you become much more circumspect in what you advise people to do.
MB: Yes. It would certainly do that. But it doesn’t mean to say .. I mean there are .. out of the three and a half thousand there’ll be people here we just simply don’t believe have been misadvised. And it comes down to individual cases you’ve got to look at.
AG: It seems like a rhetorical question but do you regret ever backing Keydata products?
MB: Well I don’t think I regret trying to do what we were doing, which is try to provide what we regarded as a very stable product for people who wanted to have a higher return on their savings than they were able to get on deposit account. That was what we were trying to do, and certrainly our analysis of the product was that it is a very stable product. What has happened here is that it has either been fraudulently or totally mismanaged by Keydata and that’s a piece of work which the Serious Fraud Office is investigating. There are many products, there are other products of this sort in the market which are performing extraordinarily stably. I wish we had sold those products rather than Keydata products, because people would be very happy with those.
AG: It’s a curious situation to find, because usually it’s the consumer that is impacted, isn’t it, in the short to medium history of banking? But in this case it seems to be for the first time it’s another bank.
MB: Well in some ways it’s a bit like when the banks failed and the building societies had to cough up, only what’s happened here is this company Keydata, which has been clearly run into the ground by the management, we’re having to pick up the pieces as a result of that, and our customers who actually were very happy with this product, and were very pleased to have it, because it gave them a better rate of interest and it was a very stable income, are now turning on us, and we’ve got to deal with that. And we will deal with our responsibilities. Everybody should be reassured. We’re not going to run away from this.
AG: And if this ends up costing you a lot of money, which it could .. looking at it in cold hard facts you’ve advised over three thousand people to invest in Keydata ..
MB: Well not all of those will be misadvised. Let’s be clear about that. I mean you’ll end up in the position if we go down this .. one of the routes we’re trying to go down is the Financial Services Compensation Scheme is set up to deal with instances where there have been criminal acts and fraud. And if the FSCS as they have said they will give an announcement in September, rule that this is in default, then everybody will be compensated, up to fifty thousand pounds. If they don’t take that view which we find puzzling if they don’t take that view, then we’ll have to sort out those people who think they’ve been misadvised by us, and those people we don’t think have been misadvised by us, and it clearly won’t be three and a half thousand people that have been misadvised by us. We’ll need to sort sheep and goats, and I’d rather the FSCS stepped in than us try and sort out who we think we’ve mis-sold to.
AG: OK Matthew. I think it’s a story that we’ll obviously return to in the near future. That’s Matthew Bullock Chief Executive of the Norwich and Peterborough.

Andy Gall interviews Matthew Bullock from the Norwich & Peterborough Building Society at 07:20 on Thursday 19th August 2010 in the Peterborough Breakfast Show on BBC Radio Cambridgeshire.