Sales Culture and Misconduct in the Financial Services Industry: An Analysis of Cross-selling Practices

Abstract

Over the past decade, a series of malpractice incidents in the financial services industry have shown that the risk of misconduct is not a theoretical possibility. Accordingly, the promotion and implementation of new ethics, values, and behaviours in banks and other financial institutions are primary objectives in the international regulatory agenda. Recent cases of mis-selling of financial products widened the scope of discussion towards financial firms’ sales practices. In particular, the widespread use of cross-selling techniques in the financial services industry caught regulatory attention, above all, among the European Supervisory Authorities. The ensuing debate was underpinned by the crucial question of how to guarantee a sustainable use of cross-selling by banks and financial institutions. This article addresses this question by analyzing cross-selling in relation to the specificities and risks posed by the financial services industry. Whilst it was possible to elaborate on regulatory solutions in relation to a distorted use of financial practices, such as securitization and interest rate benchmarks, now it is also desirable to discuss the optimal strategy to prevent cross-selling from being the ‘tool’ for financial misconduct. This is of significance given the recognized potential of misconduct cases to pose systemic threats to financial stability.