Banking: Barclays' £70m bill for bad advice

The 7.7m fine and up to 60m compensation is the largest yet levied by the Financial Services Authority for retail failings and comes after Barclays failed to ensure two investment funds it sold to more than 12,000 people were suitable for them.

The regulator said that despite the fact Barclays had identified potentially unsuitable sales were taking place as early as June 2008, it failed to take appropriate and timely action to rectify this.

Between June 2006 and November 2008, Barclays sold Aviva's Global Balanced Income Fund and Global Cautious Income Fund to 12,331 people, who collectively invested a total of 692 million.

The FSA also found that Barclays did not have adequate procedures in place for monitoring sales and responding prompting when problems were identified and that one in seven investors complained about the advice they were given.

Barclays apologised to its customers for letting them down and said it was determined to "put things right".

The news came as yesterday Santander's new UK chief executive, Ana Patricia Botin, admitted her bank had "a lot of work to do" to improve service standards after it was revealed they had the highest number of customer complaints of any British bank.

It was also named as the worst bank for customer satisfaction in a recent Which? poll.

Santander's service levels are said to have suffered as the bank seeks to integrate the Alliance and Leicester and Abbey brands, snapped up as part of aggressive expansion moves.

The bank notched up 216,158 complaints in the first six months of 2010 –the most of any banking brand – according to the FSA.

Ms Botin said the bank's service was "beginning to improve" by addressing underlying issues such as systems and processes, while also hiring 1,000 new staff to handle complaints.

With bankers pay and bonuses in the spotlight as Ministers continue talks with the City about limiting this year's settlements, the chairman of taxpayer-backed Royal Bank of Scotland (RBS) has waded into the debate by saying that many bankers "are paid more than they are worth."

Sir Philip Hampton said there was not enough disparity in pay between the "stars" of investment banking and the average "journeymen players".

"The star quality, as it were, seems to filter down to people who don't seem so star quality.

"There is, if I can use the expression, a sort of gangmaster cultural phenomenon in this, that you recruit top people who really do make a difference, who really do move markets and get business and are really high achievers.

"But they do tend to associate themselves with people who aren't such stars, but they want them around and they trust them, sometimes they move with them and there is a team associated with it.

"And the disparities between the top stars in the team and some of the journeymen players, if you like, is probably not as marked as it should be."

This year's total bonus pot for bankers is expected to amount to about 7bn. The issue is the source of coalition tensions as Liberal Democrats demand a tougher line on the banks than Prime Minister David Cameron appears ready to take although he insisted on Monday he had not given up on efforts to rein in bonuses amid public fury over rewards for failure.