Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Tuesday, July 29, 2014

An Oath for Bankers

ResPublica, a think tank, has come up with the bizarre recommendation that in order for public trust in the banks to be  restored bankers should swear an oath.

Director at ResPublica, Philip Blond, is quoted by the BBC:
"As countless scandals demonstrate, virtue is distinctly absent from our banking institutions. 

Britain's bankers lack a sense of ethos and the institutions they work for lack a clearly defined social purpose."
An extract from the oath says:
"I will do my utmost to behave in a manner that prioritises the needs of customers. 

It is my first duty to provide an exemplary quality of service to my customers and to exhibit a duty of care above and beyond what is required by law....


..I will confront profligacy and impropriety wherever I encounter it, for the conduct of bankers can have dramatic consequence for society."
All very well and nice, but to whom do the bankers swear this oath?

BBA executive director for financial policy and operations, Paul Chisnall, said:
"Restoring trust and confidence is the banking industry's number one priority.

But meaningful cultural change in an industry as complex and diverse as banking takes time....

..very well could be part of the answer".
An oath of course would mean absolutely nothing, and would entail a very small administrative burden. Hence the fact that the BBA rather likes the idea!

Friday, July 25, 2014

Back To The Future

The Office for National Statistics (ONS) reports that gross domestic product expanded by 0.8% in the April-June period.

Compared with the second quarter of last year, growth was 3.1%, the fastest pace since the end of 2007.

Total economic output was 0.2% higher than in the first quarter of 2008, its previous peak.

Hoozah!

As Robert Peston wisely observes:

Thursday, July 24, 2014

Rates Will Rise When They Rise

Mark Carney, Governor of The Bank of England, is proving to be something of a Delphic Oracle.

He spoke at a business conference in Glasgow and expressed concerns about a housing bubble developing. Yet, in the same speech, he also noted that the Bank was not worried about the house prices themselves but was worried about household debt.

He noted that interest rates will be "materially lower" in the medium term than they have been historically.

When will rates rise?

Carney is quoted by the Telegraph:
The clearest indication of when rates will rise is when they rise.”
I personally do not see them rising before next May's general election.

Wednesday, July 23, 2014

A Nice Little Earner for Russian Oligarchs

Congratulations to those Russian oligarchs who currently own property in London.

Aside from making money out of the rising property prices, they are also guaranteed to make money from the declining rouble (as the sterling value of their UK properties appreciate against the rouble) as sanctions are ratcheted up on mother Russia.

A nice little earner!

RBS Executives Wilfully Obtuse

Andrew Tyrie, chairman of the Treasury Select Committee, is to write to Sir Philip Hampton, chairman of RBS, to complain about the evidence given by Chris Sullivan, deputy chief executive of RBS, and Derek Sach, head of the bank’s Global Restructuring Group (GRG) in June;accusing them of being wilfully obtuse.

Tyrie is quoted by the Telegraph:
If this is how RBS deals with a parliamentary Committee, how much can customers and regulators rely on it to be straightforward with them?

I will be writing to the Chairman of RBS about this, and the Committee will report on it after the summer.
The executives were originally summoned by the MPs to answer a number of allegations about the treatment of small firms by GRG contained in two highly critical reports on RBS.
One report by Lawrence Tomlinson, a Government adviser, alleged that the bank’s GRG division was forcing small businesses into administration so that the bank could take their properties and sell them for a profit.
Tyrie also said:
Following the Committee’s decision to write to Sir Andrew Large for clarification, RBS has now offered the Committee what it euphemistically describes as ‘additional comments’. 

In fact, they have done a belated U-turn. It’s not as if the facts have changed. 

So it now appears that RBS has been wilfully obtuse with the Committee.” 
The financial services industry in the UK is quite simply a crock of shite!

Tuesday, July 22, 2014

Forex Criminal Investigation

The SFO has launched a criminal investigation into whether a number of traders at top banks colluded to artificially fix rates in the £3 trillion-a-day foreign exchange markets.

London is where around 40% of foreign exchange trading takes place and traders are alleged to have colluded via online chatrooms with names such as the “Bandits’ Club” and the “Dream Team”.

The Telegraph reports that so far more than 25 traders working at a number of the world’s biggest banks have been fired or suspended while regulators around the world continue their investigations.

The forex scandal is likely to be as damaging to the "reputations" of banks as the Libor scandal.

The lesson to learn from this, and all the other scandals, is that all markets are rigged in favour of the "house".

Monday, July 21, 2014

Impartial Pensions Advice

The government has stated that millions of people will be given free and impartial advice on how to invest their pensions from 2015.

This is all very well, theory. However, what constitutes "independent"?

Nationwide Online Shutdown

Nationwide customers were locked out of their accounts on Sunday after a technical glitch hit the firm's online and mobile banking services.

Nationwide have now restored service.

Friday, July 18, 2014

Inquiry Into Britain's Banking Industry

The Competition and Markets Authority (CMA) has recommended a full inquiry into Britain's banking industry, after a study found current account services and SME lending "lack effective competition".

The CMA said switching between banks remains low, meaning “very limited” gains have been made by banks with the highest levels of customer satisfaction. It said this was “not what would normally be expected in well-functioning competitive markets”.

CMA chief executive Alex Chisholm is quoted by the Telegraph:
 "Our studies have found that, despite some positive developments, significant competition concerns remain which mean that customers may not be getting consistently good service and value from their banks. 

Our provisional view is that a full market investigation by an independent expert CMA group is necessary to look at this market in detail and identify appropriate measures if competition concerns are found. 

However we very much welcome views, which we will carefully consider, before taking a final decision."
A full investigation, if it occurs, would take about 18 months.

Doubtless the vested interests will ensure that nothing concrete or radical happens if an inquiry ever gets off the ground.

Thursday, July 17, 2014

Banks Do A Wonga

The Telegraph notes that after revelations that Britain's high-street banks issued legal letters from what appeared to be independent law firms demanding that they repay money owed to the banks, the chairman of the Treasury Select Committee, Andrew Tyrie, wrote to the banks asking for an explanation.

The letters, despite being headed with names that make them look like they are from separate law firms, were actually from the banks' in-house legal teams.

In his response to Mr Tyrie, Lloyds chief executive Antonio Horta-Osorio said the bank had used the name of SCM Solicitors, a business purportedly based in Hove, East Sussex, because customers in financial difficulty did not respond to letters from the bank itself.

Mr Tyrie is somehwat less than impressed and, according to the Telegraph, is of the view that the letters were "calculated to mislead".

Lloyds claims that letters were "intended to encourage customers to speak with us".

RBS, Nationwide and HSBC also used the names of law firms when sending correspondence from their own departments. 

Cynics have noted that Wonga were not fined for their letters because the mainstream banks were all playing the same dishonest game.

Britain's financial services industry is pox ridden!


Wednesday, July 16, 2014

Employment Up, Wage Gap Rises

The Office for National Statistics (ONS) reports that the number of people in employment rose by 254,000 to a record 30.6m between March and May this year, and that unemployment fell by 121,000 between March and May to 21.1M.

The jobless rate for that period stood at 6.5%, close to the 6.4% level of Q4 2008.

However, during the same period of this year, average pay rose by 0.3% whilst CPI rose by 1.5%.

As ever with statistics from the ONS one has to be wary of them:

1 They are out of date

2 They are usually revised.

Friday, July 11, 2014

CoE Ditches Investment in Wonga - One Year On

In July 2013, shortly after Archbishop Welby said he had "bluntly" told Wonga boss Errol Damelin "we're not in the business of trying to legislate you out of existence; we're trying to compete you out of existence", it emerged that the Church of England had an indirect investment in Wonga of around £75K.

One year on, and the CoE has finally distanced itself from Wonga and dispensed with the investment.

The £1BN Loss On The Royal Mail Sale

The Business, Innovation and Skills (BIS) select committee accuse the government and its advisers (Lazard, Goldman Sachs and UBS) of botching the £3.3BN Royal Mail sale, and losing the taxpayer £1BN in potential profits.

Pricing a share issue is not an exact science, if the price is too high then all of the shares may not be sold (hence the need for underwriting) if the shares are sold too cheaply then there are accusations that a greater profit could have been made.

In this case a loss of £1BN on a sale of £3.3BN is materially significant. Also, worthy of note, is the fact that (as per the Telegraph) the asset management arm of Lazard (also a specially selected investor in the float) made £8M profit by selling off its stake immediately.

The Government sold 60% of Royal Mail at 330p in October. The shares soared by 38% on the first day of trading and rose as high as 615p but have since fallen back. Yesterday the shares closed at 474p. 

Thursday, July 10, 2014

CPP The New PPI

It seems that there has been another mis-selling scandal, akin to the PPI one, wherein people are entitled to seek redress, this being CPP (Card Protection Plan).

However, according to the Martin Lewis (writing in the Telegraph) up to five million people may be missing out on the compensation because they confuse the issue with PPI and throw away a legitimate ‘‘fill this in to get your money back’’ form for junk mail.

Since February more than seven million people have been sent CPP redress letters, dating back to policies since 2005. Many were under names such as CardGuard, Card Protection Plus, Card Safe or Egg Emergency Cover.

Martin Lewis estimates that £900 million remains to be claimed, with a deadline of August 30 looming on the horizon.

I wonder if there is any financial product in this country that hasn't been mis-sold?

Tuesday, July 08, 2014

USA Criticises UK Oil Tax

The US Energy Department has robustly criticised the UK's tax increases on petroleum exploration.

Washington said the increase in Britain’s petroleum revenue tax to 81% of profits for old fields and 62% for newer ventures pushed through in 2011, along with other penalties and a cap on relief for winding down old fields, have choked North Sea exploration and paralysed a string of major projects.

The Energy Information Administration (EIA) is quoted in the Telegraph:
As a result of the significant increases in taxes, the UK Continental Shelf [UKCS] projects have become even less competitive.
Increases in operating costs coupled with higher taxes have resulted in decreased investment in both brownfields and new exploration. Even without the increased taxes, operating costs in the UKCS were prohibitively high, exacerbated by the high decommissioning costs of old facilities.”
'Twas ever thus, governments short of cash rarely cut expenditure; instead they increase taxes.