Independent Banking Advisory Service
Established in 1992
Banking News & UK Comment 2009
Can bank customers trust bankers, banking and the banking industry now? Is this the start of a new era? We are not yet at a point where we would say trust in banking is restored. We are not even close to or near to that point - too much has happened and there is just too much 'history'. Restoration of trust in this industry will depend a lot on whether the FSA and the OFT will now properly enforce regulation backed by the intent of Government. There must be no going back or side 'deals' with bankers, which protect them rather than the banking customer. The ease with which bankers avoided the voluntary banking and business codes, should now be a thing of the past. Proper regulation must now be seen to be working. The FSA now needs to 'correct' banker's thinking and their strategy to eliminate bullying customers or penalising them for their own profits. Bankers enjoy control and power over customers. They use it to obtain more fees and interest for the banks. The banks have been allowed to get away with profiteering and plundering bank customers by successive Governments for a long period of time. Therefore, it become 'second nature' for banks to 'rip off' customers for their own benefit. Because the banking industry has been self obsessed for far too long, that 'second nature' must be totally removed and replaced with positive customer focussed management
Unfortunately, we are still seeing evidence of banks exerting pressure on their business customers unfairly. Taking additional higher interest rates and fees by using unfair pressure in order to increase the bank's profits. The banks are aware that those additional fees and interest may tip the businesses into insolvency. It is not a new tactic - but it is totally unacceptable when the bank's survival was dependent on a Government bail-out. This is one area where the FSA/OFT combined should have an influence. We trust they will not wait long before showing their clear intent in penalising such unfair and counter productive practices. - 04/11/2009
The Financial Services Authority (FSA) begins to regulate banks’ and building societies’ day-to-day contact with their customers from 1 November 2009, covering everything from direct debits, payments, instant access and savings accounts through to unauthorised transactions and notification of interest rate changes.
IBAS Comment - This news, whilst not appearing to be 'earth shattering' signals the end of banks enjoying 'self regulation' - or as we prefer to call it 'no regulation'. Hopefully, now that the FSA, which also failed badly in the banking crash has got it's act together and now has the necessary support of Government (which has not always appeared to be the case) it will regulate and properly penalize banks and bankers who rip off bank customers for their own greed - 30/10/2009.
Robert Peston BBC Business Editor's ‘Banks can learn from retailers’ dated 16th September 2009 says: ‘What's to be done? Well, a good starting point would be to remind ourselves why taxpayers in Europe and the US have bailed out the banks to the tune of $15trn, or more than $2,000 for every person on the planet. It's because there is a utility element of banking that we can't do without - which resides in the transmission of money, in providing basic credit to individuals and businesses, and in providing a safe haven for savings.
I am not claiming that defining the scope of the public-service utility is the easiest job in the world. But nor is it impossible.
And the important point - which most banks seem to have missed - is that in effect the public-service utility bit of what banks do has been nationalised almost everywhere: finance ministries and central banks provided unprecedented loans and guarantees to the banking system in order to preserve the integrity of the crucial financial infrastructure.
What many would conclude is that this public-service utility, which can never be allowed to fail, should therefore be totally separated from all other aspects of what banks do (all the other stuff, from proprietary trading in securities, to manufacturing derivatives, to flogging insurance, to investment management and so on).
The likes of Barclays or Royal Bank would not have to sell off or demerge their retail banks, although they might choose to do so. But their essential-service operations would have to be put into legally separate subsidiaries, where there would be no possibility of financial taint from their other activities. Were this to happen, the ramifications would be big - and in the short term, pretty disruptive.'
‘Here's the paradox: for all the evidence that supervision and regulation of banks was both inadequate and too "light touch" over the past few years, the fundamental regulatory structure could be simplified if banks were broken up into their utility and non-utility parts. And a proper competitive market, where there was parity of power and knowledge between banker and customer, might even in time emerge (or is that a hope too far?).’
IBAS Comment - The banks were too big, too powerful, too greedy, they gambled everything for personal and corporate profits and were out of control - they crashed and almost burnt. Because of banker’s greed, many people’s lives and their financial futures were destroyed. It was only massive amounts of ‘bailout’ cash from Governments all around the world which has allowed most banks to survive. The cost as Robert Peston states as more than $2,000 for every person on the planet and which totals $15trn is a truly massive amount. It must not be squandered now by banks manipulating the system for themselves.
The major points, which are highlighted above illustrate why the ‘bailout’ was necessary and also what must now be done to make sure it’s not necessary, ever again. Banks need to be broken up and a banking utility structure must be put in place - then tightly regulated. We should all be pressing our individual Governments to make that happen.
Daily Mail 04/09/2009 - Backtrack on banking: Why Lloyds needs to be smaller, by the Chancellor who gave it a £17bn bailout - Alistair Darling has been forced into a major rethink over bailed-out superbank Lloyds. The Chancellor last night suggested that he wanted to slim it down to reduce its dominance after admitting that the financial sector needs much more competition. It represents an extraordinary reversal given that Gordon Brown rode roughshod over competition rules in personally approving the merger of Lloyds and Halifax Bank of Scotland last September.
Liberal Democrat Treasury spokesman Lord Oakeshott said: 'The Government have been making the rules up as they go along in the banking crisis and now they have been found out. Gordon Brown was only too happy to do a cosy deal which ruined Lloyds, and now they suddenly appear to have changed their tune. 'They are lurching from crisis to crisis.' Eddy Weatherill, of the Independent Banking Advisory Service said: 'Unfortunately we are left with a giant which has not been through the proper competition channels. 'HBOS was handed to Lloyds on a plate. 'To correct that, the Government has now got to take the merger apart again.'
IBAS comment - Firm, transparent and effective regulation has always been the answer for better banking and also consumer confidence. It is also a 'given' that Government should not be able to alter regulation 'on a whim'. The failure to implement those points so far means the UK cannot recover as quickly from recession as otherwise might be the case and growth remains poor. Protecting the banking industry at any cost has been counter productive for Government and the 'bailed out' banks are well known for exploiting weakness in Government. It's good to see the Chancellor admitting to error in this matter, but we can only hope the Government will learn the lessons quickly, before any more costly mistakes are produced. BBC News 25/07/2009 - 'Customers pay' as banks rebuild - All bank customers are now paying for banks to rebuild - Banks and building societies are trying to rebuild their profits at the expense of customers, according to Moneyfacts. Michelle Slade, of the financial information website Moneyfacts, said lenders' potential profit margins were the largest they had seen since they started keeping records in 1988. "Typically we would have seen a 0.8% margin on top of their product. Now we are seeing a 3.1% margin," said Ms Slade.
IBAS Comment - Before the banks were saved and whilst they were digging a bigger hole for us all - we said that all consumers would end up paying for the bank's mistakes. Banks being saved or bailed out by Government using taxpayers funding, was only the start of consumers financial problems. Now, it's catch up time and the banks are in a hurry to make more profits to build their capital - in some cases so they can repay Government (and again control their own destiny). It seems to us that an opportunity has been missed here - with the supposedly state controlled banks. In one way we own them, having bailed them out - but we are not controlling them for our best benefits. Banks are again plundering businesses and consumers, at a time when those businesses and consumers are least able to resist or pay the increased fees and charges being levied. The reality may be that in saving banks more businesses will be bankrupted and homes taken, as the banks force ever increasing costs and charges on all banking consumers to rebuild themselves first and in doing so strip their customer's assets, as they did in the early 1990's. Is the Government still asleep on the job? They must have enough evidence now to know that uncontrolled banks create financial chaos. Because of them, the UK already faces a 10 year period of slow or no growth. If more businesses are busted by banks creating profits at any cost for themselves - that 10 year period may become 12.
Daily Mail 18/07/2009 - Sophie Wessex, her £1.7m business debt - and why she won’t pay - In 2004, RJ-H PR took out a £1.5million loan from Barclays. It is understood that, along with fellow directors Jack Cassidy and Christopher Clarke, Sophie personally guaranteed £175,000 of this loan. Yet last week £590,153.11 of the Barclays loan was one of 32 debts that were simply written off. At a time when 120 small businesses go under every day and many directors, unable to pay back loans, face bankruptcy, this leniency has drawn allegations of ‘one rule for the rich, another for everybody else’.
Last night, one industry insider said of RJ-H PR’s demise: ‘I can see no reason for a bank not recalling a personally guaranteed loan other than embarrassment or a desire to maintain their relationship with the debtor. In this case, if they didn’t call it in it’s hard to see it as anything other than a desire to stay “in” with the Royal Family.
IBAS Comment - Being a 'Royal' and in business seemed like a good thing in 2004. But things changed, as indeed they have for most UK businesses. This story quotes that the bank has 'written off the debt' and that the company was 'wound up'. That maybe correct as far as the limited company is concerned and on 'face value' from the facts available. However, at IBAS we know that personal guarantees do not just go away when a company is 'wound up'. Barclays are owed 600k and three directors have personal guarantees, for (we assume) 175k each. Every day we hear from individuals with personal guarantees. We know Barclays chase all personal guarantors for payment when companies fail. It is inconceivable that Barclays will not be seeking payment from Sophie Wessex, specifically because of her Royal connections and also the possibility of the funds being obtained from or through the Royal family. Perhaps payment to the bank is already factored into the 'unprecedented decision to increase their annual allowance to £250,000 - effectively paying them not to work. ' which is also quoted in the article. The other two directors are even more at risk from their PG's and will not have the Royal family to rely upon as a source of funds when Barclays seek payment.
Financial Times 08/07/2009 - Rhyme of the credit-hungry entrepreneurs - The new Enterprise Finance Guarantee and how the SFLGS became a nightmare for some small businesses. “There are a lot of sleights of hand that the small businessman may not understand,” says Eddy Weatherill of the Independent Banking Advisory Service, a membership body, “the SFLG has been consistently abused.”
IBAS Comment - This article raises questions, which affect all UK businesses dealings with their bank. Particularly, where a government sponsored or government guaranteed scheme is suggested. The failings of the SFLGS over many years and the way in which banks were able to abuse that system have never been addressed. Those badly affected by the failures within the SFLGS have simply been 'hung out to dry' or put on the wheel like hamsters - in a system where a complaint to their MP inevitably moves onto the FOS, where nobody is prepared to investigate the issues or the complaints, but where bank decisions and views are merely 'rubber stamped' as being OK by the FOS. The HBOS cases have raised even more issues and failings, but as yet we do not have any more knowledge of when, or how, these matters will be properly examined by a totally reliable and independent investigator or investigating body. Until they are, (and please, not another whitewash) how can anyone be sure the EFG is not just another banking cash cow - where entrepreneurs now seeking financial support are merely providing another vehicle for bank short term opportunistic targets and profits - with personal failure and heartache as the only reward for those entrepreneurs later?
Robert Peston, BBC's Business Editor 03/07/2009 - Why bankers aren't worth it - Good analysis on how and why top banking executives are not worth the money they have been paid.
IBAS Comment - This article confirms what IBAS has been saying for many years - it is absolutely true that fat cat bankers have ripped us all off for their own personal gain and have enjoyed huge financial rewards. In doing so all of us will pay again, so that the banks will survive their own recklessness. However, many businesses will fail because of what these bankers have done and because of what they are now doing to get back into profit. Governments and regulators have failed us all by not regulating banks and allowing the escalation of a short term, get rich quick mentality, which has been well rewarded. The banks are still not under control yet and they will inevitably now plunder businesses and consumers to maximise their own financial position. In a protected position as they still are, where Government has proved it will not let them fail - they are able to enlarge margins and profits quickly. With less competition what will stop them?
Background and more on HBOS by Ian Fraser 26/06/09 - Examining HBOS -A must read for all who are involved or interested in HBOS business banking matters. This whole matter 'smells' bad and the 'smell' of corporate excess and the wreckage of the many businesses it has destroyed will not go away - until it is properly investigated - Prime Minister Gordon Brown must make sure that it is -
Fraud allegations hit Bank of Scotland - 6th June 2009 - Some very serious allegations were made against Bank of Scotland corporate division at Westminster this week, with a call for a criminal investigation by James Paice, Conservative MP for South-East Cambridgeshire. So serious are his concerns that he used a debate at Westminster this week to put them on the record, where he does not have to have conclusive evidence and can avoid the risk of being sued. MPs only use that privilege in exceptional cases. For full transcript visit Hansard 2 Jun 2009 : Column 43WH - This follows BBC Radio 4's "File on 4" programme, which last week reported some of the detail of the case
James Paice MP also stated that: 'That has been referred to the financial ombudsman, who is yet to make a final decision. Since then, other examples of the apparent abuse of the scheme by HBOS have emerged from other businesses, all of which have expressed no confidence in the independence of the financial ombudsman service.' and also that 'The objective of the debate is to persuade the Minister to undertake to present the issue to the regulatory authorities for a full and exhaustive examination'.
IBAS Comment - The HBOS debate raised many issues - not least the failure of regulators, failure of the SFLGS regulation, failure of FOS investigations - but also how is it when it is alleged that 200 businesses were involved, that no serious investigative work has yet been carried out by external agencies. IBAS support James Paice MP and his MP colleagues in flushing this matter out 'into the open' and also in his call for a criminal investigation - let's see what happens next and how quickly?
Bankers made 'astonishing mess' - The effects of the continuing banking crisis will be felt for generations, a committee of MPs has warned. The Treasury committee, in its second report on the crisis, said it had been caused largely by the banks' own reckless behaviour. But more importantly the Treasury committee has established that: "There is clearly an unresolved inconsistency between, on the one hand, bankers' assurances that they are increasing their lending and, on the other hand, widespread and clearly sincere complaints that credit is difficult to obtain and increasingly expensive," says John McFall MP - Our previous comments support what the Treasury Committee has also established in their report - it's obvious to us (and it has been for a long time) that Bank and banker's PR is to represent a view they want us to believe - not what is true.- 1st May 2009
Ongoing news in April 2009 shows we are not yet through the worst part of the recession and that many small businesses are failing as banks turn the screws by reducing borrowings, requesting more security, increase their charges or fees and generally exert pressure on small business cash flow. Where the banks hold guarantees for their borrowings the bankers know that provided the guarantor has a property, on which the bank can make demand, the bank can then call on that guarantee for payment. Whilst large banks have been protected by a government 'bail-out' struggling businesses are not getting the same treatment from their bank.
These are extremely dangerous times for small business. Enquiries to IBAS show that, as with the last recession banks are looking after themselves first and targeting business owner's assets for full payment. - April 30th 2009.
26th February 2009 - Fred Goodwin to receive £650,000 for life - what a reward for failure of the bank. Banker's rewards are illustrated well here. A pension pot with £16m and already drawing 650k a year and still only 50 and he will continue to draw that amount for life - are there any suitable words for this?
But, where were the regulators and Government whilst this cosy arrangement was being set up? They were all looking very deliberately in the opposite direction, whilst expounding the benefits of the huge profits being made by the banks (which were by then already well out of control) and whilst the banks used more and increased profiteering methods against banking consumers.
13th February 2009 - The banking mess is still growing and the banking industry has now proved they were completely out of control - just as IBAS has been saying since the Cruickshank banking review in 2000. Cover up after cover up has followed since then, as bankers inflated profits and then gambled them again on making more profits for the insatiable investors, whilst also building 'nest eggs' for themselves. Government and regulators have allowed the 'gravy train' of greed to continue without even a thought for the consequences, which are now becoming evident in huge losses and company failures. We now have Recession and the growing possibility of many years business stagnation. We knew bankers couldn't be trusted and also that they needed very strong regulation to control their excesses - way back in 2000 - why didn't Government learn that lesson? Who is going to pay for that? We don't want to be 'fobbed off' with any more reviews or excuses - we've all heard too many of those already. We want 'heads on blocks' with all those at fault seen to be paying for their incompetence, negligence, greed or recklessness. Nothing less will do.
27th January 2009 - No good news this new year as more job losses and 92% Rise in Repossessions Anyone thinking this recession is going to be over sometime soon is kidding themselves. From what we are seeing from enquirers, if the UK manages to pull out of this recession in less than three years then it will be a miracle.