Independent Banking Advisory Service
Established in 1992
Banking News & UK Comment 2011
More than £1bn PPI compensation paid so far in the first 10 months of the year to people who were mis-sold payment protection insurance (PPI), financial watchdog figures show. IBAS Comment: There is a long way to go before the PPI compensation 'saga' is finally completed and we have already seen (as expected) the evidence of banks 'misquoting' or making 'mistakes' with the figures for compensation (and considerably in their favour) - so all those claiming PPI compensation should do their own double checking before they accept any bank 'offer' - if it doesn't look correct question their figures and do not be 'rushed' by the bank into accepting anything which is not 100% accurate - as your acceptance will end matters! – 21.12.11
Chancellor George Osborne has backed most of the recommendations in the Vickers' banking report, including protecting retail banking from riskier investment activities. Mr Osborne also backed the suggestion from the Independent Commission on Banking, which said that banks should keep back a bigger cushion of assets. The changes are designed to avoid a repeat of the 2008 banking crisis. He also said state-owned RBS would reduce the size of its investment bank. The reforms to the banking sector mean the deposits and overdrafts of ordinary consumers and small businesses will be handled only by ring-fenced parts of banks, which will not be allowed to embark on risky investment activities. Mr Osborne told MPs in the House of Commons that he supported plans by RBS to shrink its investment bank into a business more focused on UK companies. This is expected to involve a significant retreat from North America , where the bank acquired a big presence when Sir Fred Goodwin was chief executive.In one key area the banking industry has succeeded in getting the Treasury to water down one of Vickers' recommendations HSBC had successfully argued that it would be disproportionately expensive for it to do this. In HSBC's case they are much bigger outside the UK than inside.
John Longworth, director general of the British Chambers of Commerce (BCC), said the reforms in themselves would not help the wider problem of businesses gaining access to bank lending. "Businesses still find it difficult to get access to capital, or capital on reasonable terms, in what is a highly risk-averse environment. "This creates the danger of slowing the recovery and it is possible that Vickers' recommendations could add to this problem."Given the timescales for the implementation of credit easing, the time may now have come for the government to consider the introduction of an SME bank."
IBAS Comment – IBAS is 100% behind the Vickers recommendations because banks were completely out of control. Control measures must be put in place now to prevent bankers being able to create such chaos as they did in 2007 - ever again! - IBAS has also supported the principle of an independent SME Bank for some years as that might reduce the chaos of banks destroying large volumes of SMEs when internal bank policy changes (often dramatically) due to the bank's 'appetite' decreasing for certain markets or sectors.The UK needs long term business banking support to build SMEs not the bank's short term thinking with 'knee jerk reaction' by bankers and as evidenced in the last 20 years - 19.12.11
Lloyds says its preferred option for the sale of 632 bank branches is to sell them to the Co-operative Group. The mutually-owned Co-op had been in competition with new bank venture NBNK for the assets. Lloyds will now enter exclusive talks with the Co-op, which runs a financial services division along with a supermarket retail arm. - IBAS Comment: Some good might yet come out of this whole financial mess created in 2007 - that's providing the Co-op Bank maintain their 'ethical' ideals for banking and business matters. We hope that will be the outcome and also that the Co-op will provide some badly needed ethical stability in a marketplace filled with greedy and profiteering bank providers - 14.12.11
Autumn statement by government - small firms get £40bn credit help The biggest new policy is a £40bn "credit easing" scheme to make it simpler to underwrite bank loans to small firms. Small businesses with an annual turnover of less than £50m qualify for the scheme. Mr Osborne says it will cut the average interest rate for those firms by 1%. The chancellor also said he wanted to help medium-sized UK businesses - "who have been neglected for too long" - and announced a £1bn business-finance partnership aimed at companies. The chancellor also announced tax relief for people who invest in start-up businesses. From April 2012, anyone investing up to £100,000 in a new start-up business will be eligible for income tax relief of 50%. In 2012, any tax on capital gains invested in such businesses will also be waived.- IBAS Comment: We can only wait to see whether banks pass on the help to small business instead of using the help provided in helping themselves. Till now the lower Base Rates (since March 2009 of 0.5%) have certainly assisted the banks rebuild their own businesses (by charging much higher margins on lending) with small firms paying much higher prices and also fees for banks to 'recover' from the mess they created. IBAS welcome the Government's new incentives but suggest they should now watch much more closely how banks actually deliver any Government aid or assistance they provide - 30.11.11
Information Commissioner Christopher Graham has long called for the courts to be given the power to impose custodial sentences, saying routine hacking and blagging of personal data by finance, debt collection and claims management firms was going untackled - Last month, he said he feared any effort to increase the punishments would be delayed by the Leveson inquiry into press behaviour. "The government should lose no more time in bringing in appropriate deterrent sentences to combat the unlawful trade in personal data," he said in reaction to the committee's report. "We need action, not more words. Citizens are being denied the protection they are entitled to expect from the Data Protection Act." - IBAS Comment: Unfortunately, words and no action has been the reason why 'blagging' has continued and increased tenfold, particularly where financial services and debt collection is concerned. The Information Commissioner sits with his 'hands tied behind his back' as the talking continues and ordinary people have their information ransacked by the unscrupulous and the mercenaries employed in people tracing/ ambulance chasing/debt collecting and bank recoveries - 27.10.11
The chairman of the Financial Services Authority has insisted that the forthcoming Financial Conduct Authority must have the power to ban financial policies or misleading advertisements. Lord Turner described the past behaviour of the financial services industry as unacceptable and told a City audience that this had already led to more than £15bn being paid out in compensation to customers. "The history of retail financial services over the last 20 years has not been a happy one," he said. "Punctuated with too many waves of mis-selling - large scale customer detriment followed by large imposed compensation - [such as] personal pensions, mortgage endowment policies, split capital trusts, payment protection insurance," Lord Turner added. He said that customers of financial policies were at a disadvantage to salesmen in the financial services "industry" because of the complexity of many policies, which could make them too risky or too expensive for some people. "In financial services the potential for the customer to be ripped off is simply far greater than in other sectors of the economy - and the consequences potentially more significant," he said. IBAS would agree 100% - There have been just too many bank instigated 'rip-offs' over too long a time and bank customers need much more protection from sophisticated and well advertised banking 'scams' than is available now - giving the FCA power to ban and kill at birth any future PPI type 'scams' would make the financial services industry a safer place for banking customers in the future - 21.10.11 see Trust in Banking and UK Financial Services.htm
The “Big Four” accountancy firms, whose complacency and dereliction of duty were major contributors to the banking crisis that tipped the UK into recession, could be getting their comeuppance at the hands of the European Union. Chartered accountant and economist Richard J Murphy says: “It is not just wrong but ethically repugnant that firms can audit their own advice, as PWC did when they advised on Northern Rocks’ use of its shadow bank and then audited that same advice, with calamitous consequences for which they have not been held liable.” Proposals from the EU’s internal market commissioner Michel Barnier would put a stop to all this. He wants to force accountancy firms to choose between being consultants or auditors. IBAS view is that financial 'cronyism' is behind much of what has happened to create the current financial uncertainties and the proposals suggested may also remove the ability of big banks to bully or intimidate the accountancy profession. - 20.10.11
Bank of England governor Mervyn King has said this financial crisis could be the worst the UK has ever seen. - His comments after the Bank authorized the injection of a further £75bn into the economy through quantitative easing (QE) was:"This is the most serious financial crisis we've seen at least since the 1930s, if not ever," Despite criticizing the use of QE in the past, Chancellor George Osborne said it was now the right move to make. The Bank has already pumped £200bn into the economy, under the previous Labour government. It has done this by buying assets such as government bonds, in an attempt to boost lending by commercial banks. - Was Mervyn King's comment a shock? NO - IMHO it is the worst ever crisis the UK has ever faced and everyone should by now be aware that the UK finances are in a huge mess. They should also be aware that everyone in the UK will continue paying in lost jobs/less business funding and even more business closures for many years in the future. IBAS estimated it would take 10 years (minimum) to climb out of this current financial mess - on that estimate we are not even half way through. This means even more 'calls' for payment of Directors Personal Guarantees as bank's refuse to support businesses throughout the UK or their markets just disappear because of the revenue being lost from inevitable large cuts in spending from all sectors as businesses tread water or just plan cuts to survive. The blame for all this must fall on UK banker's greed and negligence and the massive support they have obtained just to keep their business 'alive' has not helped in further diluting UK assets. It appears very unfair support, whilst ordinary UK businesses are being forced into failure by those same bankers - and whilst those bankers also still remain untouched personally for their many failures - for ordinary businesses - their individual business failure will also inevitably trigger their Director's personal guarantees, which in turn will result in either their personal equity being diluted to pay the banks - or their homes being repossessed by bankers as they obtain payment from the Demand made on the Director's Personal Guarantee/s. Are small business owners and director's homes and personal assets to be plundered to help banks survive - as they were in the early 1990s? From our view point that appears to be exactly what is now happening - 08.10.11
Radical reform of British banks - should ensure that Vital services for small businesses and individuals, looking after their deposits, making loans to them, and moving money around, would be in new ring-fenced subsidiaries and ensure that 'casino banking' risks are borne by banks and their shareholder in the future - not all Uk taxpayers. The commission estimates the social costs of its proposed reforms - the costs for all of us, rather than just for banks' creditors and investors - as between £1bn to £3bn a year. That compares with the annual £40bn costs per year of lost output that follows periodic financial crises. Therefore, a 'no brainer' when viewed against the financial subsidy presently being enjoyed by banks at UK taxpayers expense. Now we need Government to make sure that it happens within the timescale and not subjected to the normal banking evasion tactics. - 12.09.11
Calls mount to punish greedy banks who sparked credit crunch - Calls mount to punish greedy banks who sparked credit crunch - Four years on from the start of the credit crunch and still no bank 'heads' have been 'lopped' - will consumers allow the big bankers who created this chaos because of banker's greed and profiteering a further opportunity to evade retribution? As further jobs are lost, businesses shut and households come under even greater pressures - the top bankers continue to evade the 'fallout' from their own actions (whilst ordinary bank staff continue to lose their jobs in call centres and at counters throughout the UK ). The BBA continues to deny that bankers caused the problem and continues to deny that banks need to be closely watched and cannot be allowed to fail again - at least not if taxpayers are again to be accountable for the banker's excesses. Eddy Weatherill of IBAS said "How can 95% of the population go out to work every day to pay their taxes while bankers are allowed to continue with their feeding frenzy yet haven't been punished for it? They have got away with murder but enough is enough" - 02.09.11
PPI & the costs to UK Banks - All the big banks have now admitted to huge potential bills for paying PPI compensation to their customers. Lloyds has set aside £3.2bn, Barclays £1bn, RBS group £850m, Santander £731m and HSBC £269m. At the start of August, the FOS revealed that it had been receiving 900 fresh PPI complaints every day and that these now made up 65% of its total workload. - Unfortunately, the true cost to the many customers who were ripped off in this 'racket' which goes back for at least a decade exceeds the £6bn now being placed on bank balance sheets against profits. The true cost will never be known - because many people borrowed for businesses which have since failed - others have died and their claims are lost because of the time taken for regulators to properly investigate PPI scams and then stop them - The banks will therefore never pay back what was truly owed to their customers. - 01.09.11
Can you trust your bank? - If you seek financial advice it appears (from the Panorama report) that the banks are not 'treating their customers fairly'- but that should come as no surprise - should it? By now we would have thought the majority of the UK population might/should have got the message that any 'advice' from any bank may well ruin your health, wealth and also your future. The message that always comes through is that banks are purely interested in their own well being, profits and their own future. When the whole UK population understand that very simple message the better their individual future can be protected from bank profiteering - which (despite the many FSA fines) continues unabated - 13.06.2011.
For many years we have said that banks enjoy too much power and too much control over small businesses and how they operate. The way in which funding is or is not provided can inevitably alter a businesses viability. Surely there is a better way? It's been a long time coming - but it's possible that Funding Circle can lead the way – an online marketplace where people can lend directly to small businesses in the UK, eliminating the high cost and complexity of banks and where people might obtain higher, stable returns for the long term and businesses can also obtain lower cost finance to expand and develop. For any small business seeking capital it's got to be a first stop! - 08.06.2011
The Assessment and redress of Payment protection Insurance complaints - FSA Publication - For all those who need to assess for themselves whether they have been mis-sold PPI.
Banking industry gives up on PPI mis-selling battle - The banking industry now appears to have abandoned a legal fight over the mis-selling of payment protection insurance (PPI). The British Bankers' Association said it would not appeal after losing a court challenge against new rules on mis-selling.
At last the banking industry has realized that this battle is no longer winnable. That's a definite first. Assuming all banks adopt the same realization - the the next 'battle field' is when each individual claim is processed and in getting the money back from the banks for the mis-selling. It should be straight forward - but where banks are concerned they do not give way or give money back without a fight. Expect them to fight for every penny and stretch it out as long as is possible before they eventually are forced to pay out.
Allocating £1bn or £3bn to pay for compensation by individual banks may look encouraging - but this industry is well known for 'sleight of hand' and also 'smokescreens and mirrors' and the allocation will be for their benefit in accountancy and tax purposes. Of course the bank's maximum focus will now be on whether they can 'disprove' mis-selling to the FOS on these cases. We only hope the FOS is 'up to the job' for this one now - and that they will extract adequate compensation for each case proven and not 'roll over' for the banks to 'tickle their tummy' ! - 09.05.2011
Lloyds Banking Group to pay for miss selling PPI insurances - The Lloyds chief executive Antonio Horta-Osorio, who took over at the beginning of March, said he was now abandoning the BBA's legal challenge. "We will no longer be participating in the BBA's judicial review," he said. "We do not want to continue a long-standing debate of this with the regulator." - Perhaps this means a new broom will 'sweep clean' at LTSB Banking Group - It will certainly not be before time. This appears to be a 'breakaway' from the bank lobby to retain the 'status quo'. However, the devil is always in the detail. It was not many years ago when LTSB said they would stop taking unlimited guarantees for business borrowings but we note they started doing so again afterwards and also relying on them for legal actions, including taking people's homes. Perhaps, Mr Hora-Osorio will look at that issue as well - and also clean up the LTSB 'old guard' who do not want to move forwards from the dark ages. Now we wait to see whether other banks will follow suit - or not. - 05.05.2011
UK Banks Lose case on Personal Protection Insurance - This case was brought to court by the the British Bankers Association (BBA), which is the well funded association which represents banks and campaigns for them. When you read anything from the BBA it should be remembered that their brief is quite simple - protect the banks - so don't expect a balanced view. Even law is contested by the banks and the BBA fights the bank's corner by making statements which alter existing facts or they produce their own brand of fact to suit the banking industry. It is inevitable that any legal judgment or action which is not in the complete interests of the banks will be appealed or where possible a new case found to open up an existing judgment for the bank's benefit. Call us skeptical but recent history (over the last 20 years) evidences a very strong, determined and well financed banking lobby fighting to preserve the 'status quo' even when their industry brought this country (and others ) to their knees. As we have stated many time Banks cannot be allowed to enjoy power in the way they have in the past - it is just too dangerous. This case revolves around a specific product manufactured by the banks (and others to be fair) as a good little 'earner' and which was miss sold in very large numbers over a long time. We have seen cases where banks front loaded PPI premiums of 10% on business loans of 100k and provided the business owner with no choice. Adding interest to the whole amount over the full period of the loan. A hugely profitable industry for the banks - which they did not (and do not) want to let go.
Often businesses miss sold PPI were run by self employed proprietors who would never benefit from such a policy. No wonder many were driven into insolvency. It's a disgrace that PPI miss selling was allowed for so long and banks also allowed to repeatedly resist both the miss selling and overcharging issues associated with PPI sales.
In the next seven days the BBA must decide whether they will appeal the judgment. Again, recent history says the BBA will appeal the judgment:
a) because they can afford to do so
b) because they will want to buy more time
c) because the extra time will allow them to lobby and affect opinion
d) because they can still hold onto the money earned - whilst they resist the judgment
e) because the longer they can hold off a 'final' judgment the more people will lose the possibility of a claim (many will have already lost that opportunity by this time).
Most bankers would say they cannot afford not to appeal this judgment. Most consumers would say they should not be allowed to appeal it.
We have seen the law operate many times to favour bankers and their interests over the last twenty years and there is rarely justice dispensed when the last and final judgment is produced or 'manufactured'. Most banking consumers will have a very recent memory of the bank penalty charging debacle - where the BBA and the banks achieved a 'knock-out' in the last round, despite being on the canvas in the previous rounds - let's hope we will see justice dispensed this time around - not law being operated for banker's interests. - 04.05.2011
Having pondered the question over many months we wondered: As 2011 starts, Just how are UK regulators and criminal investigators tackling the numerous banking frauds and irregularities, which helped create the considerable mess that the UK is now in?
How many bankers are being prosecuted? Are the regulators and police acting or 'sitting on their hands'? Ian Fraser articles provide some idea of progress.
How are the FSA investigating HBOS when they have yet to interview Paul Moore, former head group regulatory risk at HBOS-turned-whistleblower?
What about the £260bn plus of toxic assets on HBOS’s balance sheet? How has that affected the shareholders of that bank? see Ian Fraser's blog - 05.02.11
Although the FSA has imposed some bank fines - if only as a reminder that there is a regulator of banks - the scale of the problem is truly immense and the damage created by banks and bankers equally immense. The banks have got away with no regulation for far too long and because they are now 'set in their ways' they require a severe shock - each and every time they break the rules - the banks need convincing by regulators that they cannot continue cheating their customers and if they do they will receive a severe dose of regulatory medicine in return. Only when bank customers can see hard evidence of banks and bankers being punished for their past activities ( of which some appear criminal) and for which all consumers are now paying a very heavy price, can the Financial Services industry start to rebuild consumer confidence in what they have to offer.
UK regulation is still not stopping banks from cheating customers. Treating Customers Fairly (TCF) for many bankers is just a joke phrase. The FSA needs to enforce the Principles 1 - 11 published as being the minimum standard which is now required of bankers - to much greater effect. Our experience on business banking case work is that a number of banks are still treating the complaints as they always have - ignore, deny, and 'fob off'. It will take many years of Regulation (at this pace) before the banking industry shows any sign of a return to true values of integrity and honesty.
Also, how does the Financial Ombudsman Service actually perform in this arena - Is it a banker's servant and too close to bankers? - Can the FOS investigate bank cases effectively? They have the tools, but do they have the desire or the brief to use those tools? More importantly are they allowed by the banks to do so? - Where is the link between the FSA and FOS so that the FOS passes cases which demonstrate the bank's lack of awareness or use of the FSA principles onto the FSA? We have seen no evidence that this connection either exists or that it is effective in any way. These questions are being asked now as we and many others question whether the banks manipulate too many entities for their financial benefit - Eddy Weatherill 19 January 2011
IBAS chief executive EDDY WEATHERILL comments on 12 January 2011: see Daily Mirror article 12/01/2011 on RBS boss's proposed £3million bonus
City watchdogs gave the bailed-out bank a £2.8million penalty for “multiple failures” in its handling of complaints. But, astonishingly, bosses are still preparing to dish out a £1billion bonus bonanza for staff
Eddy Weatherill, of the Independent Banking Advisory Service, fumed: “It’s almost criminal for RBS to be paying bonuses.
“Stephen Hester ought to give the money, if he gets it, to charity because he doesn’t deserve to be rewarded when the bank is still in such a mess.”
RBS was kept afloat by £20billion of state support at the height of the banking crisis, leaving it 83% publicly owned. With the bank’s share price still languishing at around 40p, the taxpayer has a long way to go before it sees the money again.
On 15th December 2010 - The National Audit Office reported that the scale of the support currently provided to the banks has fallen from its peak of £955 billion to £512 billion as at 1 December 2010 - see report: http://www.nao.org.uk/publications/press_notice_home/1011/1011676.aspx.
However, the amount of cash currently borrowed by the Government to support UK banks has risen by £7 billion since December 2009 to a total of £124 billion. The report also warns that the Treasury will probably be paying for the support it has provided to UK banks for years to come.
Those now complaining about the lack of jobs, redundancies, lack of money and finances for local councils and business as well as individuals at more risk from bankruptcies should look no further than banks and bankers for the reason behind the current mess and also for the mess still to come - for which we will all pay many times over.
How many years before the UK is over this mess? Our best guesstimate is at least 10 years minimum.
Does anybody still think that RBS/NatWest and Lloyds TSB/HBOS senior management and directors are worth a bonus of any kind for putting the country in the mess it is? We do not - and it's about time the Government stopped talking and agreeing with those bankers and instead acted for the common good of this country and all the people robbed of their opportunity and their future by banker's excesses.