Loans and Finance

Loans and Finance

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

Thursday, January 31, 2013

Banks Mis-sell 90% of Rate Swaps

In an unsurprising revelation it appears that banks have yet again been fingered for selling another "dodgy" financial product that was totally unsuitable for the hapless customers onto whom it was foisted.

This time the offending products were complex interest rate derivatives, sold to SME's.

The FSA is of the view that around 90% or more of these products, which did not comply with one or more regulatory requirements, were mis-sold.

Seemingly the banks structured these products in such a way that escape from them was prohibitively expensive.

Martin Wheatley, chief executive designate of the Financial Conduct Authority, accused lenders of selling businesses “absurdly complex products” and said many customers could now expect compensation from their banks.

Mr Wheatley is quoted in the Telegraph:
This marks significant progress in our review of these products. We believe that our work will ensure a fair and reasonable outcome for small and unsophisticated businesses.”
Lenders have seemingly set aside over £700M against potential swap mis-selling claims, with Barclays making the largest provision of £450M. Whilst it is expected that the provisions will double, the final cost may in fact hit £10BN.

Tuesday, January 29, 2013

Happy Bonus Season!

As a bleak and gloomy January draws to a close, the banksters are looking forward to awarding themselves some fat bonuses for all their "hard work" last year.

Sadly for the banksters not everyone is happy at the prospect of their self awarded largess. Step forward Unite which has demanded a meeting with UK Financial Investments Ltd (UKFI), which manages the government's (ie the taxpayer's) investments in RBS, Lloyds and UK Asset Resolution, over RBS's expected bonus payout of £250M.

As if things were not already bad enough for RBS, the Wall Street Journal reports US authorities are pushing for a settlement of LIBOR allegations that would result in the bank not only paying a fine of £500M, but also pleading guilty to criminal charges. Barclays and UBS got away with criminal charges, because they co-operated with the authorities.

RBS executives don't want to plead guilty because they fear that it will cause clients to cut off activity with the bank, and that it could increase exposure to ever more litigation.

Maybe then they should hold back on paying out a bonuses this year, lest the money be needed to pay for ongoing litigation?

Monday, January 28, 2013

The Great Green Loan Rip Off

The government has announced today, with all the usual fanfare and razzmatazz, that those wishing to improve the energy efficiency of their homes will be able to borrow money to buy energy efficient boilers and to insulate their homes etc.

However, what the government doesn't tell you is that the interest rates charged on these "green loans" will be relatively high, and that the "green assessors" (doubtless trained at taxpayer expense) who will visit your home to asses its "green needs" will charge for their services.

In other words it is a rip off!

Friday, January 25, 2013

UK Economy Flatlines

The UK economy shrank by 0.3% in the final three months of last year, and posted zero growth for the year as a whole.

Many now expect the UK to go into a triple dip recession.

Conclusions of Forthcoming EU Summit

Here, courtesy of the FT, are the draft guidelines for the conclusions of the forthcoming European Council summit to be held on 7th and 8th of February.

At the end of the document, to be added later, is the Multiannual Financial Framework (MFF) ie the European budget!

Thursday, January 24, 2013

Diamond Geezer In The News Again

The Telegraph reports that some of Barclays’ most senior executives, including former chief executives Bob Diamond and John Varley and current head of investment banking Rich Ricci, are among 104 people who unsuccessfully attempted to keep their names private ahead of the UK’s first trial related to the manipulation of Libor.

The list of 104 individuals comes from a case brought by Guardian Care Homes, which is seeking about £38M in damages from Barclays over interest rate swaps it claims it was mis-sold by the bank.

Guardian Care Homes says that the swap product it was sold was tied to Libor, which it argues was set dishonestly.

Barclays was ordered to give lawyers working for Guardian Care Homes the identities and emails of staff that it passed to regulators investigating the manipulation of the key interest rate.

Wednesday, January 23, 2013

Davos 2013 - The Grischa Hotel


The Grischa Hotel, where the "great and the good" of the world of finance are staying in Davos this year during the World Economic Forum (WEF).

Davos Live

Davos 2013

Davos is hosting the annual gathering of the "great and good" in the world of finance, more commonly known as the "World Economic Forum" (WEF).

It seems that all and sundry are worried about David Cameron's promise of an "in/out" referendum on Europe post the 2015 election if the Tories win.

They should not worry, this is political posturing designed to put UKIP's nose out of joint and to buy Cameron more time wrt his EU discussions.

There is absolutely no guarantee that the Tories will win the next election, nor that Cameron will be leading them; hence the "promise" of a referendum is a meaningless as the oft repeated assurances emanating from Eurozone finance minsters that the "crisis" is over.

Friday, January 18, 2013

E.ON's 9% Price Hike

As the country is blanketed in snow and the mercury plummets what better day for E.ON's 9% price hike (announced in December) to come into effect?


Money Laundering In The Eurozone

Cyprus has put together a presentation to convince the Eurozone that it is not a haven for money laundering.

One of the slides shows how Cyprus and other Eurozone countries score wrt complying with recommendations on 49 areas evaluated by the Organisation of Economic Co-operation and Development’s financial action task force.

The highest ranking country for non compliance was Greece, scoring 13.

Thursday, January 17, 2013

Barclays Discovers Ethics



Barclays discovers that ethics is not a county near London!

Wednesday, January 16, 2013

Blockbuster

Blockbuster has gone the way of HMV and Jessops, and has gone into administration.

Deloittes will act as administrators.

Lee Manning, joint administrator at Deloitte, said:
In recent years Blockbuster has faced increased competition from, internet based providers along with the shift to digital streaming of movies and games.

We are working closely with suppliers and employees to ensure the business has the best possible platform to secure a sale, preserve jobs and generate as much value as possible for all creditors.

The core of the business is still profitable and we will continue to trade as normal in both retail and rental whilst we seek a buyer for all or parts of the business as a going concern. During this time gift cards and credit acquired through Blockbuster’s trade-in scheme will be honoured towards the purchase of goods.”
 Blockbuster employs over 4,000 people.

Bundesbank Repatriates Gold Bullion

The Bundesbank is to repatriate gold reserves held abroad in order to tighten control and combat future currency crises. It will repatriate a large percentage of its holdings from New York and all of its bullion from Paris.

This move signals the demise of the the Dollar as a reserve currency (as the gold stored in the Fed can be pledged to shore up the Dollar), and the resurgence of a quasi gold standard.

The lesson is clear, if you invest in gold do not rely on mere paper certificates to validate your holding.

Why LIBOR Matters

As per Max Keiser:
"LIBOR and other mrk riggers have just dropped UK 10-yrborrowing costs below 2%. Each £ saved in interest loses 2 £'s from pensions/savers."
In other words the LIBOR riggers profited at the expense of the rest of us!

Tuesday, January 15, 2013

HMV Collapse

Now that HMV has gone the way of Jessops and placed itself in administration, aside from the worries faced by the staff of HMV those with gift vouchers will also be worried.

As of today HMV have stopped accepting HMV gift vouchers. Whilst the administrators may choose to accept them at some stage in the future, there is no guarantee that they will. Additionally, if any part of the chain is sold to a third party the new owner is under no legal obligation to accept the gift vouchers.

Which? recommend that those holding gift vouchers in failed chains such as Jessops and HMV write to the administrators to ask for a refund (a process that offers no guarantees and may well take at least 12 months). Which? have a helpful Q&A section wrt failed retailers, which also has a link to a template for a letter asking for a refund of gift vouchers held.

Ironically, not everyone has done so badly out of the failure of HMV. A number of companies/individuals heavily shorted HMV in the days running up to its demise in the hope of making a killing out of its failure.

Monday, January 14, 2013

#Grexit Morphs To #Crexit

The eye of the storm moves to Cyprus.

FSCS £3M Campaign

FundWeb reports that the Financial Services Compensation Scheme (FSCS) is to spend £3M on a second advertising campaign to make consumers aware their savings are safe if banks go bust. The first campaign that cost £4M in 2011 was halted, after it failed to make a positive impact.

The campaign will be funded by banks and building societies, and will run until 31 March 2014.

The rationale for the scheme was explained by FSCS chief executive Mark Neale:
Our research showed a lack of understanding and knowledge about the protection we provide. We want to reassure the majority their money and savings are safe, and warn those who unwittingly put their money at risk.

We need to build awareness over time and cannot wait for the next crisis to try to engage people. By then it will be too late and queues will already be forming.”
In other words the banking industry is scared stiff of a run on the banks as and when the next crisis occurs.

Friday, January 11, 2013

Thursday, January 10, 2013

The PPI Ill Wind

The old saying "it's an ill wind that blows nobody any good" has been proved by some statistics released by the Financial Ombudsman Service (FOS).

The FOS, which deals with PPI claims when banks and their customers cannot agree a settlement, said it had increased the number of expected new cases for the 2011/2012 financial year to 375,000.

In view of this increased workload it has taken on 1,000 extra staff to deal with the backlog.

Wednesday, January 09, 2013

Jessops On The Verge of Administration

The Telegraph reports that Jessops the camera retailer is on the verge of administration.

As such there is a risk that, once in administration, Jessops's gift vouchers may no longer be accepted if the administrator decides they are no longer valid in the stores.

UPDATE

PwC has now confirmed that Jessops has now filed for administration.

The Emperor's Clothes of Banking

Kudos to Vernon Soare, executive director of professional standards at ICAEW, for exposing the emperor's lack of attire in yesterday's Parliamentary Commission on Banking Standards wrt the banking "profession" by noting that there:
"isn’t actually a banking profession".
Well said!

Tuesday, January 08, 2013

Eurozone Unemployment At All Time High

The number of unemployed people in the Eurozone rose to record levels in November, rising to 11.8% from 11.7% the previous month. Spain, at 26.6%, had the highest level of unemployment.

In total 18.8 million people were unemployed in the Eurozone, an increase of 113,000 from the previous month.

The seeds of the Eurozone's destruction have been sown, the only question is when will the harvest be reaped.

Monday, January 07, 2013

Basel III - Kicking The Can Down The Road?

Banks have been given several years to meet new rules governing the amount of liquid assets they must hold on their books to see them through a short-term market crash.

The Basel Committee on Bank Supervision has stated that banks would only need to have 60% of the necessary short-term funding in place when the rules become effective in January 2015, and would have until 2019 to fully implement the liquidity coverage ratio (LCR).

The new rules also widen the range of assets that banks can put in the buffer; these now include shares and retail mortgage-backed securities (RMBS), as well as lower rated company bonds. Despite the fact that these can only be included at a hefty discount, this is an indication that the Committee recognises that there are problems within the banks' balance sheets.

The rationale for this easing of the rules was explained by Sir Mervyn King, who told the Telegraph that it had decided to opt for a “graduated approach” to avoid “disruption to the orderly strengthening of banking systems or the ongoing financing of economic activity”.

In other words the Committee was worried that the rules would knock any nascent recovery for six. As to whether this slackening of rules actually helps banks and the global economy recover, or simply kicks the can further down the road, remains to be seen.

Friday, January 04, 2013

Accountancy Age's Financial Power List 1013: Big Hitters

I have been placed 25th on Accountancy Age's Financial Power List 2013: Big Hitters, a rundown of who the magazine thinks will be the biggest players in accounting and finance during 2013.

25 Ken Frost, serial blogger and HMRC agitator
A long-time thorn in the side of the ICAEW in his blogging capacity, Frost has found that HMRC's travails have taken up a bigger chunk of his social media efforts. Not that the institute is out of his line of vision, but his probing questions and good contact base make http://hmrcisshite.blogspot.co.uk an amusing and revealing read.