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!

BBA Peddles a Myth

Anthony Browne, chief executive of the British Bankers Association (BBA), has stated that “branch numbers will continue to fall” and that those who call for a return to branch banking are “out of kilter with what millions of customers want”.

He is quoted in the Telegraph:

“The way we bank now is far easier and faster.”

The reality is that pushing customers towards online banking only will benefit the banks' bottom lines. However, when something goes wrong or a customer actually needs to speak to a human being, Browne's vision of the future is that we will be forced to use hopeless and hapless call centres to resolve our problems.

Additionally, the loss of the personal relationship with a bank manager means that customers seeking loans and mortgages are left in the hands of faceless credit ratings agencies and the banks' computers and risk algorithms for the outcome of the loan decision.

In short, the customer is screwed!

Housing Market Cooling?

The British Banking Association (BBA) would have us believe that the housing market is beginning to cool as mortgage approvals for new homes fell for the fourth consecutive month in May, to its lowest level since last August.

Data from the British Banking Association showed that mortgage lending grew by £1.2BN in May, down from a £1.3BN in April.

Mortgage approvals totalled 41,757 in May down from 41,834 in April.

The BBA's chief economist Richard Woolhouse is quoted by the Telegraph:

"Our figures indicate that the heat appears to be coming out of the housing market.

These are the first mortgage approval figures we have seen since the introduction of the Mortgage Market Review, so it is significant they have fallen for the fourth row in a month."

Maybe so. However, a reduction in approvals of 77 hardly constitutes a collapse!

Let us see more data in the coming months before concluding that the market is cooling.

Banks Delay PPI Claims

In March I noted that the financial ombudsman service (FOS) was taking on 2,000 new PPI complaint cases a day, with numbers rising at "unprecedented" rates.

I went on to note that it was clear that the banks were trying to delay payouts:

"Needless to say, as the number of referrals to the FOS rises, so does the length of time it takes for the ombudsman to make a determination. It seems that the delays are also increasing because some companies are causing unnecessary delays.

Natalie Ceeney, chief financial ombudsman, is quoted by the BBC:

"As the complaint levels show no sign of slowing, consumers are increasingly having to wait longer to get their complaints sorted - with many businesses still continuing to cause unnecessary delays.

Where businesses have shown a real commitment to better customer service and diligent complaints handling - including actively engaging with the ombudsman - cases are resolved more quickly and easily, to the benefit of everyone."

None of this is surprising, those who were sold PPI will see this as an opportunity to try to obtain a refund (irrespective of whether they were mis-sold PPI or not) and the banks will do everything they can to try to reduce the costs of the claims.

That being said, had the banks not incentivised their staff to sell policies that were in many cases clearly inappropriate to people who didn't need them/couldn't claim on them when they needed to, then this entire mess could have been avoided.

The greed of the banks is now being repaid by the perspective that the banks' customers have that there is "free" money to be made.
As the old saying goes, "what goes around, comes around".

A claims management company, Emcas, has now also said that banks are rejecting around a third of claims from customers. Ironically, as per the Telegraph, the Financial Ombudsman Service (FOS), which deals with complaints rejected by the banks, is upholding the majority of PPI claims.

Why such an anomaly?

A cynic would argue that the banks are trying to slow things down in the hope that those claiming simply give up.

Needless to say the British Bankers' Association denies that banks were deliberately turning down legitimate claims in the hope that they would avoid having to pay up.

Make of that what you will.

Irrespective of what obstacles (real and imaginary) are put in your way by the banks, do not give up; if rejected by the bank make a claim direct to the FOS, do not use a claims management company (which will charge you a percentage of any compensation that you receive).

BBA Blames The Weather For Savings/Lending Imbalance

The British Bankers' Association (BBA) reports that personal deposits rose by 6.2% over the year to January. However, net mortgage borrowing from the banks grew by a mere 0.2% in the year to January.

The reason for such an imbalance (despite pressure from the government for the banks to lend more)?

The BBA blame the weather!

 

BBA statistics director, David Dooks said:

“January’s severe weather impacted adversely on what was already a subdued picture of borrowing demand from households and businesses. While general economic growth stalls, low consumer and business confidence generates a natural tendency to restrain borrowing appetite, repay borrowing where possible and to build up cash and savings as a buffer.”

Weasel words!

The reality is that banks are doing all they can to shore up their balance sheets, lest another self inflicted financial storm rocks their boat.

Secret Bankers' Meeting

Apparently, last Tuesday, there was a secret meeting of the CEO's and Chairmen of some the UK's leading banks.

The purpose of the meeting was to address the reputational damage from the industry's ongoing spate of scandals.

Mark Kleinman of Sky News reports that the meeting at HSBC's head office discussed Liborgate, as well as the payment protection insurance and interest rate swaps mis-selling.

It is regrettable that it has taken the banks so long to start to try to address issues that have been in the public domain, and the source of much public contempt, for such a long period of time.

The meeting also discussed the appointment of a successor (an outsider) to Marcus Agius as chairman of the British Bankers' Association (BBA).

Given the BBA's dismal reputation it would be better that they simply shut it down and set a new organisation up.

The BBA Tries To Rewrite History

Zero Hedge have revealed that the hopeless, hapless and despised British Bankers' Association (BBA) has attempted to rewrite history, and is trying to pretend that it had no regulatory role wrt Libor.

Specifically, as per Zero Hedge, here is an extract of the BBA's current governance documentation:

"There is a named individual at each bank responsible for submitting the daily bbalibor rates to Thomson Reuters and this will be the person responsible for the bank's cash - usually their title is 'treasurer' or similar. There is written guidance on what information that person should take into account when calculating that day's rates for his or her bank. As all contributor banks are regulated, they are responsible to their regulators, rather than BBA LIBOR Ltd. or the FX&MM Committee, for maintaining appropriate procedures for contributing, including the maintenance of internal chinese walls."

This is the "same" paragraph a few weeks ago:

"BBA LIBOR Ltd. receives the fixings and underlying contributor data at the same time as all other live data recipients and monitors all submissions into the fixing process. Any anomalous rates are queried with the submitting bank, and a log of these queries is kept and given to the FX&MM Committee on a periodic basis, who may choose at their discretion to follow up these queries in line with established governance and scrutiny procedures."

Now that the arrest warrants are being prepared, the BBA is doing everything it can to distance itself from Liborgate.

Too little too late!

Bank of England Releases Libor Emails

The Bank of England has released further information and correspondence in relation to the BBA Libor Review in 2008.

As per the Bank of England's website:

"At the hearing on Tuesday 17 July, the Treasury Committee requested papers relevant to the Bank of England’s interaction with the US Federal Reserve and with the British Bankers’ Association (BBA) Libor Review in 2008. To allow the Treasury Committee to see the full context, this submission contains all papers relevant to the BBA Review. It provides a brief commentary and timeline of the events around the BBA Review in 2008, together with the supporting documents.

In 2008, the Bank of England worked closely with the Federal Reserve Bank of New York (FRBNY) and the Financial Services Authority to input into the BBA Review of the Libor system.  The Bank of England and other central banks were concerned to influence the outcome of the BBA Review. 

Because the Libor system was, and is, a private sector arrangement and was not subject to financial regulation, it was not appropriate for the public authorities to endorse or determine the outcome of the BBA Review. When the amended proposals were adopted in December 2008, the Bank was not aware of any dissenting views expressed by the official or private sectors.

In reading these documents, it is important to distinguish between three issues. First, allegations of wrongful behaviour by Libor panel banks. Second, concerns about the operation of the Libor process in times of market stress. Third, the need for any system based on self-reporting to be alert to the possibility of “accidental or deliberate misreporting”, as referred to in the Geithner memorandum.

The Geithner memorandum contains no allegation of wrongful behaviour and relates to the second and third of these issues. At no point did the FRBNY draw the attention of the Bank to evidence of wrongdoing in the setting of BBA Libor. Indeed, with the exception of the memorandum sent by Mr Geithner to the Bank in early June 2008, none of the other documents published on 13 June 2012 by the FRBNY had been shared with the Bank.

The attached timeline gives a detailed account of the interaction between the Bank and the Federal Reserve and the BBA.  The broad outline of events is as follows:

• From May 2008, the Bank of England encourages the BBA to conduct a global review of Libor and banks to engage with the review at a sufficiently senior level.  It also begins to discuss these issues with the FRBNY.

• The Bank considers the points in the Geithner memorandum and ensures that those points are taken on by the BBA.

•  The Bank and the Federal Reserve work closely together behind the scenes to influence the consultation paper issued by the BBA on 10 June 2008.

• The Bank also continues to work on influencing the outcomes after the consultation paper is published until the BBA publishes its final report on 18 December 2008." 

The relevant documents can be viewed here.

Marcus Agius Resigns From BBA

Marcus Agius having resigned from the role of Chairman of Barclays earlier today has also now quit the chairmanship of the British Bankers' Association (BBA).

This being the same BBA that expressed "shock" last week at the fact the LIBOR was rigged.

One wonders how it is, with Agius at the helm, that the BBA managed to remain so "blissfully ignorant" of the wholesale fraud going on around them!

Barclays Shuts The Stable Door

Barclays has now begun to realise that a simple fine from the FSA will not be quite enough to rebuild its shattered reputation. Therefore in order to atone it has sacrificed its chairman Marcus Agius, who has resigned.

Ironically the surname Agius means "a very old and wise person".

Agius is indeed very wise allowing himself to be removed from the eye of the storm in this manner. He might also care to consider his position with the British Bankers' Association (BBA), which only last week expressed "shock" at Barclays actions.

What is Agius's position within the BBA?

Why he is their chairman!

What was it the BBA said last week?

"The British Bankers’ Association is shocked by yesterday’s report about LIBOR." 

Don't the other members of the BBA ever talk to their chairman?

For good measure, in order to further appease the baying crowd, Barclays have launched an audit of its business practices. This will be conducted by an independent body and report to the new deputy chairman, Sir Michael Rake.

Barclays has promised:

• a "root and branch review" of its "flawed" past practices 
• a public report of the audit's findings 
• a new mandatory code of conduct for all staff

This presumably is being done in the hope that it doesn't have to sacrifice Bod Diamond, the CEO, who will appear before the Treasury Committee on Wednesday.

Bob and Barclays need to understand two things:

1 Shutting the stable door after the horse has bolted is too late, and

2 Diamonds are not forever!

Question For The British Bankers Association

Why are you only now "shocked" at the revelations about LIBOR being rigged, when over three years ago Zerohedge wrote the following?

"Everyone knows there is something very screwy about LIBOR...."

You could have asked your board to investigate at the time, the board is after all rather well placed to know what is going on with LIBOR as it contains senior executives from banks such as Barclays.

Banks Cave In Over PPI - Or Do They?

The British Bankers' Association (BBA) has stated that banks will drop their legal challenge to paying compensation for mis-selling Payment Protection Insurance (PPI).

The volte face is a result of Lloyds giving up the fight last week, and announcing that it would set aside a £3.2BN compensation fund, closely followed by Barclays announcing that it has thrown in the towel.

However, before those with "£ signs" in their eyes start popping the champagne corks in anticipation of receiving a payout, customers of the banks should consider this. Banks will simply fund these claims by putting up charges on loans/credit cards and, most likely, will introduce charges for current accounts.

One way or another, it will not be the banks that end up paying the compensation.

Lloyds Tops List of Shame

I see that, not content with topping the FOS's list of shame, Lloyds has also topped the list of shame published by the Financial Services Authority (FSA).

The FSA report that Lloyds received more than 280,000 complaints in the first six months of 2010.

Barclays received 259,266, and Santander 244,978.

Well done lads!

Lloyds are unapologetic, they claim that its their size that generates the volume of complaints and note that the complaints came from less than 1% of their 30 million customers.

So that's alright then!

The British Bankers' Association (BBA) also tried to weasel out of the criticism, the BBC quote them:

"The banking industry welcomes greater transparency but is concerned that the separate publication of complaints data by the Ombudsman and the regulator could lead to data overload. What should be a useful overall summary could become a complex and confusing exercise."

Pathetic!

Mortgage Lending Falls

The British Bankers' Association (BBA) report that new mortgage approvals fell in August to 31,767 during the month, a 16 month low.

Gross mortgage lending fell to £8.1BN, 7.6% lower than August 2009.

The BBA are of the view that lower demand for mortgages is the reason for the decline. That in itself may be the case. However, they may care to consider why demand is falling.

Could it be that the terms/conditions that the banks are attaching to mortgage offers are simply not attractive/viable for potential borrowers?

Mortgage Approvals Rise

The British Bankers's Association (BBA) has released figures that show that overall mortgage lending has declined month on month in July, in spite of the fact that there has been an increase in the number of mortgage approvals.

Mortgage approvals for house purchases in July have hit a 17-month high of 38,181, up from 35,564 in June.

BBA figures also show that net consumer borrowing fell by an annual amount of £0.2BN. However, outstanding balances rose by 8.7% (to £24.7BN) as a result of interest debt.

The sword hanging over the "economic recovery" is the level of consumer debt, not the strength or otherwise of the housing market.

The BBA may do well to remind its members that by profiteering from excess charges and extortionate rates of interest, the banks are threatening the economic recovery.

Hopes of Housing Recovery Dented

Despite rises for three months, figures from the British Bankers' Association (BBA) show that the number of mortgages approved for house purchases fell by 25.3% in the 12 months to March and were down by 7% compared with February 2009.

26,097 mortgages were approved in March, down from 34,920 a year ago.

Last week the Council of Mortgage Lenders (CML) reported that 24,300 mortgages were approved in February, up from 23,400 in January.

As to whether this is a temporary "blip", or an indication that the "rally" was no more than a dead cat bounce, only time will tell.

House Sales Slump

The Times reports that house sales have slumped to a 30 year low last month.

Chartered surveyors reported that an average of 17.4 transactions had been completed each month between March and May, down from 18.5 in the three months to April.

This is the lowest figure since records began in January 1978, according to the Royal Institution of Chartered Surveyors (RICS).

Given that the housing market in Britain has been made, rather unwisely, into the engine of the economy this news is not good for anyone (home owner or not).

One crucial factor that affects house sales is that of interest rates, and these in turn are set by Libor.

Libor is a benchmark supposed to represent the cost of borrowing in the London interbank market. However, Forbes reports that in recent months, empirical evidence and market rumors suggest that banks are manipulating the Libor setting process for their own ends.

Banks manipulating the market?

Surely not!

Ironically the British Bankers' Association (BBA), which represents 230 banks from around 60 countries that operate in Britain, said today that it will increase its scrutiny of banks that contribute to the setting of Libor.

Shutting the stable door firmly after the horse has bolted.

Northern Rock

Bloomberg notes the following:

"The cost of overnight borrowing in pounds rose the most since June as the bailout of U.K. lender Northern Rock Plc stoked concern other home-loan providers will be forced to seek emergency funding.

The overnight rate banks charge to lend pounds soared 60 basis points to 6.47 percent today, the highest in more than a month, according to the British Bankers' Association. The three- month rate fell 7 basis points to 6.75 percent, the BBA said."

Northern Rock's share price is currently down 34% on the day.

The time has come for the Bank of England to:

1 Lower interest rates

2 Knock some heads together in the City, and ensure that the self imposed moratorium by banks on interbank lending is lifted

Should the Bank of England fail to loosen interbank liquidity, other banks will start to wobble. Bloomberg notes that Bradford & Bingley Plc and Alliance & Leicester Plc also rely more on financial markets than customer deposits to fund mortgages.

It is time for the Bank of England to get off the fence.

Self Appointed IVA Watchdog Under Fire

An organisation that claims to be the regulator for the "cowboy-plagued" IVA industry, has itself come under fire from the Department of Trade and Industry (DTI).

An IVA (individual Voluntary Arrangement) is being touted by the cowboys in the financial services industry as a panacea for people with excessive debts.

An IVA is a legal contract between debtor and creditor, supervised by a Licensed Insolvency Practitioner (who takes a fee), the purpose of which is to reach a compromise between debtor and creditor and avoid the consequences of bankruptcy.

The DTI is more than a little aggrieved that IVA.com, which launched its website earlier this week, claims to be a regulator and was displaying the logo of the DTI's official Insolvency Service without permission.

Unfortunately for IVA.com the DTI claims that it knows nothing about the organisation, and has requested that the logo be removed.

Evidently the British Bankers' Association (BBA) also looked into the company, as the BBA logo was used without permission.

Hardly a promising start for a "regulator"!