The Financial Services Authority, the UK financial regulator, said today it is “taking tough action” against five banks for deficiencies in how they handled customer complaints, although the watchdog declined to name the institutions in the firing line.

The FSA said the banks are “undertaking major changes to the way they deal with complaints and two of the five banks have been referred to enforcement for further investigation”.

However, the FSA did say that it did find good standards of handling complaints from some firms.

There was no indication of whether the complaints mentioned related to wealth management or private banking.

The regulator later told this publication that it was not disclosing the names of the banks.

The FSA said it looked at several banking groups responsible for more than 70 per cent of the complaints firms receive and report to the FSA and over 60 per cent of those resolved by the Financial Ombudsman Service.

It found poor standards of complaint handling within most of the banks assessed, including:

A lack of senior management engagement and accountability for the delivery of fair complaint handling;

Poorly designed staff incentive schemes that made branch staff reluctant to pay redress to customers, even in situations where the bank was at fault;

Poor quality complaint handling by staff in branches and general call-centres leading to inadequate investigations, poor decision making as to the outcome of the complaint and unsatisfactory correspondence with customers; 

Complaint handling procedures that led to staff issuing multiple, repetitive responses to customers, forcing them to restate their complaint a number of times in the face of ongoing negative responses from the bank;

The failure of banks to learn from previous complaints and to make changes to prevent similar complaints arising in the future.