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Monday, 16 March 2015

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As we all know, the country went into a tailspin following the collapse of the banks, both here and abroad. You can say what you like about the Tory LibDem government's attempts to turn the country around, and the opposition's criticism of it. But one thing is for sure. Whoever is paying for the crisis, it's clearly not our top bankers.

In the first week of March the total pay of the CEOs of our largest banks was revealed. The boss of Lloyds, Antonio Horta-Osorio, got £11.5m, Stuart Gulliver at HSBC got £7.6m, and Barclays’ Antony Jenkins got £5.5m. RBS boss Ross McEwan modestly took £1.85m after voluntarily turning down a £1m bonus, because he “does not want this issue to be a distraction from the task of building a great bank for customers and shareholders.” Surely because he does not want everyone to ask the obvious question: given RBS lost another £3.5bn last year, the seventh year in a row of losses that brings the total to £43bn since the 2008 bailout, how come you were offered a £1m bonus to turn down in the first place?! And how come, overall, RBS handed out £421m in bonuses to its “top” bankers last year?

So, now would be a good time to give a round-up of continuing financial services shenanigans, all taken from the mainstream media both left and right, since January 2014.

It includes...
  • Bank scams, from sneaky mis-selling to outright fraud, from mammoth large to small-ish.
  • The huge fines US regulators have imposed, in contrast with the measly fines we do.
  • Revolving doors: some of the former bank regulators who got hired to advise the banks.
  • Promises, predictions and failures to rein in the banks.
  • The continuing rise of consumer and mortgage debt, which got us into all this trouble in the first place.


JANUARY 2014

RBS payouts to UK staff expected to total £500m despite an £8bn loss
The bank is now expected to show an £8bn loss after announcing that mis-selling scandals and legal bills in the US were forcing it to take a £3bn hit. Analysts at Credit Suisse calculated the bank's total losses since the 2008 bailout would reach £43bn, almost as much as the £45bn pumped in by taxpayers to buy shares in RBS to stop it collapsing. The top management team have waived their bonuses for 2013 but other staff will expect to receive payouts, including Rory Cullinan, who is to run the new bad bank being set up by RBS. GUARDIAN

Bank customers mis-sold duff packaged accounts winning thousands of pounds in compensation
Many customers were automatically signed up for deals by pushy bank sales staff. Some were told the accounts were their only option, and the benefits were often exaggerated. As a result, many customers found they never knew the account additions existed - and didn’t even want them. New figures show there have been thousands of complaints from account holders who say they paid up to £300 a year for the perks. Independent body the Financial Ombudsman Service has seen a 155per cent rise in complaints over the past nine months. And in eight out of ten cases it is finding in favour of the consumer and forcing the bank to pay compensation. Many customers are receiving thousands of pounds. Someone who paid £25 a  month for five years for an account typically including breakdown cover, mobile phone and travel insurance would get at least £1,600. A packaged account is a current account where you pay a monthly fee for perks. Typically these include travel insurance, breakdown cover, mobile phone policies and preferential loan rates. DAILY MAIL

Savers' hopes of seeing rise in interest rates being dashed by banks with £130bn war chest of cheap cash
The £80bn taxpayer-backed Funding for Lending scheme in particular, which gave banks a cheap source of cash to lend as mortgages, meant banks no longer needed to fund these deals from savers. With no reason to attract savers, savings interest was cut on many deals. Just before Funding for Lending was launched, average rates on easy-access accounts were 1.55per cent. But as of last month, the average had fallen to 0.82per cent. Nevertheless, savers are still saving. The amount in ‘non-interest bearing accounts’, which includes current accounts, jumped by £21billion in the past 12 months to more than £130billion, Bank of England figures reveal. DAILY MAIL

Former head of bank regulation says growth is thanks to too much borrowing, of the kind that caused the bust
The former head of the Financial Service Authority, Lord Turner, has compared Britain's rapidly recovering economy with the "hair of the dog" treatment for a hangover. Turner, who was on the shortlist to be governor of the Bank of England before Mark Carney was chosen for the job, told an HSBC breakfast that the economy had reverted to its pre-crisis model of growth. He said: "We have spent the last few years talking about the need to rebalance the economy away from a focus on property and financial services and towards investment and exports. We are now back to growth without any rebalancing at all." GUARDIAN

Cap on rip-off pension fees 'shelved for at least a year'
Government plans to cap charges on workplace pensions will be delayed for at least a year, it emerged last night. The cap on charges above 0.75 per cent was meant to be introduced in April and intended to protect millions of workers being automatically enrolled into company pensions from paying high fees. The original plan first announced in October and dubbed a “full frontal assault” on pension charges, set out options including an outright ban on fees higher than 0.75 per cent, or 1 per cent for savers automatically enrolled in a workplace pension. Groups which had campaigned against high charges said news of the delay was a blow to millions of savers. The industry has furiously lobbied ministers to drop or delay the policy, warning that the government was “creating hugely significant practical and operational risk” for its auto-enrolment pensions programme by introducing the cap. TELEGRAPH

Goldman Sachs plots a way round EU bonus cap
Goldman Sachs is devising ways to hand its highly-paid bankers a third element to pay in response to the EU's bonus cap, which prevents bonuses of more than 100% of salary being paid out, unless shareholders specifically approve 200%. Goldman Sachs’ 32,900 staff on average received pay of $383,000 (£233,000) in 2013. As a result of the cap, banks such as Barclays and HSBC are preparing to make additional awards of shares to staff which do not count as salary or bonuses.GUARDIAN

RBS bonuses: Government defends policy
Labour has demanded George Osborne block any attempt by Royal Bank of Scotland (RBS) to pay bonuses of up to double its bankers' annual salary. The government owns 80% of RBS and could block large bonuses. Under EU rules, from 2015 RBS can only pay bonuses up to 200% of annual salary if shareholders approve the decision. David Cameron said he would veto any attempt by RBS to increase its overall pay and bonus bill, but did not say the government would reject individual pay awards. As it is, fewer than 100 RBS investment banking staff would be affected by the bonus decision, as RBS has reduced the size of its investment banking arm by about three-quarters since 2007. BBC NEWS

9m Britons are using credit to cover rent or mortgage payments - and 1m use payday loans
Nearly one million cash-strapped Britons have taken out a payday loan in the last year to help cover the rent or mortgage costs, a new study reveals. In total, nine million have borrowed to cover their rent or mortgage payments in the last 12 months, turning to unauthorised overdrafts, ramping up credit card debt or turning to friends or family for cash. Housing charity Shelter, which conducted the study, said it dealt with just under 9,000 calls to its helpline from people struggling to pay their rent or mortgage last year, a jump of one third on the total for 2012.DAILY MAIL

Big Four banks have paid out just 5% of their £3bn compensation fund for “interest rate swaps” mis-selling to small businesses
The Financial Conduct Authority (FCA) said £158.6m had been paid in compensation by Britain's biggest four banks - Lloyds, RBS, Barclays and HSBC - by the end of December, compared with £81.2m at the end of November. A total of 1,040 offers of compensation had been accepted by customers at the end of last month, up from 547 at the end of November. The extremely complex “swaps” are insurance policies designed to protect against interest rate rises and were widely sold to businesses taking out loans between 2001 and 2008. But when interest rates actually fell, firms had to pay large bills, typically running to tens of thousands of pounds, or face big penalties to get out of deals. Regulators last year ruled that the banks had mis-sold these swaps to about 40,000 firms. DAILY MAIL

UK car sales at highest since 2007, helped by bank mis-selling compensation payouts
British new car sales rose to their highest level since 2007 last year, bucking a weak European trend to grow by 10.8 percent on the year. The Society of Motor Manufacturers and Traders (SMMT) says the sales were fuelled by growing confidence, cheap finance deals and PPI payments, shifting 2.265 million cars in 2013. Mike Hawes, the SMMT's chief executive, said it was difficult to measure the precise impact of the estimated £18bn of Payment Protection Insurance compensation, but that average payouts of £3,000 were having an impact: "It's enough to put a deposit down on a car." GUARDIAN

Pensions annuities risk causing the next big financial mis-selling scandal, says Conservative MP
Gloucester MP Richard Graham raised concerns about consumers’ ability to fully understand the annuities products they were offered, adding many were not clear about the fees they would have to pay. He said: ‘Since this is potentially the second biggest financial purchase of our lives, I believe the state of things is worrying.’ Mr Graham referred to a recent seminar on annuities, which he chaired, during which he asked the Association of British Insurers if there was a danger of any of its members being sued for mis-selling.  ‘There was a long pause before the answer came: 'Not yet'', the MP said today. DAILY MAIL

Isas were launched 15 years ago to encourage saving. Today the worst cash Isas pay out £1 on £1,000 invested
Britain's biggest banks have paid as little as £1 interest on every £1,000 saved in the worst cash Isas of last year. Barclays, Halifax and Santander had the three worst-paying accounts over the past 12 months. Each gave just 0.1per cent to loyal customers. Incredibly, state-backed Halifax and Lloyds have eight rotten Isas in our list of the ‘dog’ accounts which you should ditch today. Our analysis of almost 100 accounts showed that 15 Isas from large banks and building societies (ranked on rates for £1,000) paid between just 0.1per cent and 0.5per cent. Isas were launched nearly 15 years ago to develop and encourage the savings habit through tax breaks. Savers have piled a huge £225billion into these accounts, with £15billion going in during the past 12 months. DAILY MAIL

Barclays boss admits it could take 10 years to rebuild public trust
Barclays CEO Antony Jenkins said the series of scandals that have rocked the banking system, including the mis-selling of payment protection insurance and Libor fixing, had damaged the bank's reputation over the long term. "Trust is a very easy thing to lose, and a very hard thing to win back. In my view it will takes several years – probably five to 10 – to rebuild trust in Barclays," he said.GUARDIAN


FEBRUARY 2014

RBS to reignite bankers' pay row with bonus pot of £550m set to be revealed amid £8bn annual loss
RBS, which is just over 80 per cent owned by the Government, is thought to be heading for an annual loss of close to £8billion for 2013 after it stunned the City last month by revealing a string of scandal-related financial charges worth more than £3billion. Its latest round of provisions include £1.9billion to cover mainly US penalties over mortgage-backed financial products, an extra £465million to payment protection insurance (PPI) compensation and another £500million for mis-selling of interest rate swaps to small businesses. The bank was already facing bad debt write downs of up to £4.5billion in the creation of an internal 'bad bank' to wind down toxic loans. DAILY MAIL

HomeServe hit with record £30.6m fine for duping families into buying expensive insurance for broken boilers and blocked drains
The Financial Services Authority issued the penalty after it found HomeServe had ‘serious, systemic and long running failings, extending across many key aspects of its business’. The fine comes on top of some £16.8million HomeServe is paying in refunds to thousands of wronged customers who took out the policies because of misleading information and hard sell tactics. The company, which styles itself as the UK’s ‘fifth emergency service’ used to have three million customers in this country, holding 7.5million policies. However this began falling significantly after it cut its sales team in the wake of the investigation. It had been expected that customer numbers would bottom out at 2million. DAILY MAIL

Think you know how much your pension costs? 'Hidden' scheme charges and how you can find out how much you're paying
Pensions minister Steve Webb has announced today that all defined contribution workplace pension providers will have to offer complete transparency to savers and employers about how much they are being charged for their pension. The Government will submit an amendment to the Pensions Bill designed to crack down on the hidden charges that over the course of a career can have a huge impact on your total pension pot. Even clued-up pension savers may not be aware they are being charged not only an annual management charge, but also a host of other fees related to the investment of their pension contributions. DAILY MAIL

Home ownership in England falls to lowest level in 25 years
The latest English housing survey showed that the proportion of homes lived in by owner-ocupiers had dropped to 65.2%, down from 71% in 2003 and its lowest level since 1987. Ownership levels have been driven down by rising prices and tougher mortgage criteria, and charities have called on the government to increase the number of affordable homes being built. Campbell Robb, Shelter's chief executive, said: "These figures confirm the historic shift that people across the country are already feeling. As house prices rise, the dream of a stable home is drifting further out of reach. The survey also showed that the number of private tenants also overtook those in social housing for first time in 2012/13, according to English housing survey. 3.9m of the country's 22m households were living in private rented homes in 2012/13, compared with 3.7m social renters. In 1980, when the records began, there were 2m private and 5.3m council tenants, but the sell-off of council properties through right-to-buy, a number of changes in the private sector and, in recent years, falling home ownership, have caused the turnaround. GUARDIAN

Over 2.6m households spend more on bills than they earn - and their monthly shortfall has doubled in a year
Figures from Legal & General show that one in eight homes (12.6 per cent) are struggling to cover their bills – up from one in ten last year. Households who struggle to pay their bills suffer a shortfall of £85, up by over 50 per cent in the last year. In some regions the average shortfall is considerably higher. The dire findings by Legal & General’s 'Moneymood survey' comes despite the fall in inflation to 1.9 per cent, which is likely to ease the strain on household's disposable incomes. But although inflation dipped to a low last seen in November 2009, the number of people who don't have enough cash for their bills has shot up by 756,000 to 2.6million up from 1.9million last year. The cost of gas and electricity has been one of the largest contributors to inflation over the last 27 months. DAILY MAIL

SFO charges three ex-Barclays bankers over Libor rigging
The charges were announced by the SFO and takes the total number of individuals facing criminal proceedings over allegation linked to Libor-rigging to six. The SFO is continuing to investigate the manipulation of benchmark interest rates and further charges are expected. David Green, director-general of the SFO, described the investigation into Libor as "enormous" and said he was "sure" more individuals would be charged in connection with the allegations. The three charged men, Peter Johnson, Jonathan Mathew and Stylianos Contogoulas, were among a list of 104 current and former Barclays bankers who last year attempted to keep their identities anonymous as part of a legal case brought against the bank by a care home operator that claims it was defrauded into buying interest rate hedging products. Barclays declined to comment. TELEGRAPH

Bank of England governor calls for bankers' bonuses to be deferred
Mark Carney has stepped into the row about bankers' bonuses with a demand that a large chunk of the pay packages for senior staff should be deferred "for a very long time". Carney's comments followed news last week that Barclays was paying bigger bonuses despite announcing plans to shed staff in response to a fall in profits. Carney said the Bank of England now had the powers to step in and limit bonus payments if a bank was deemed to have inadequate levels of capital.GUARDIAN

Bank of England to 'stress test' banks in case a house price crash requires another bail out
A ‘stress test’ will examine whether banks will need bailing out if prices plunge. A recent Nationwide Building Society survey showed house prices had risen by 8.8 per cent since January 2013. The high-profile examination by the Bank could highlight the gulf between Bank of England boss Mark Carney and Chancellor George Osborne over the housing market. Bank officials are keen to use whatever tools they can to prevent a price bubble, with Carney drawing attention last year to the relatively small number of new homes built. Osborne’s Help to Buy scheme offering Government-backed mortgages has been blamed by some for helping to inflate the market. DAILY MAIL

Institute of Directors blasts Barclays for short-changing shareholders and dodging EU cap on bonuses
The Institute of Directors slammed the bank’s decision to hike its bonus pool for last year by 10 per cent to £2.38bn. It said it ‘cannot be right’ for bonuses to be ‘almost three times bigger than the dividends paid to shareholders’. The row erupted as Barclays announced it has hiked its bonuses by 10 per cent to £2.4bn, despite a slump in profits and thousands of job cuts. But it said its ‘casino bankers’ enjoyed a 13 per cent increase in their windfalls, sharing a pot of £1.57bn. The bank also awarded a higher proportion of its earnings as bonuses. The scandal-hit lender also came under fire for trying to swerve restrictions on bonuses imposed by Brussels in January. The cap limits banks to paying a maximum of one year’s annual salary as a bonus, rising to twice salary if shareholders approve. This was supposed to stop the casino-style behaviour that led to the financial crisis. To dodge the new rules, Barclays has been dishing out monthly cash payments to top staff since January: these are classified as part of employees’ basic pay, so do not count towards their bonus. DAILY MAIL

Financial Ombudsman Service “Consumer Champion” Natalie Ceeney swaps sides to work for HSBC bank
The former boss of the Financial Ombudsman Service who made her name slamming the banks for mis-selling payment protection insurance has joined one of her main antagonists, HSBC. Her move, along with other top civil servants, will raise questions over whether enough is being done to ensure public officials do not abuse sensitive knowledge in their private sector jobs. Last year HSBC recruited chief spook Jonathan Evans, previous head of domestic security service MI5, to help tackle fraud after its billion pound fine for laundering cash for Mexican drug cartels. Rival Barclays hired Hector Sants, the head of the Financial Services Authority, as head of compliance. The most astonishing appointment was when Dave Hartnett, the former head of HM Revenue and Customs, agreed to work for accountancy giant Deloitte, which specialises in tax avoidance. The former taxman, whose ‘sweetheart deals’ allowed Starbucks and Vodafone to avoid billions in payments, sparked fury by switching sides to work for the  firms’ accountants.DAILY MAIL

New inquiry into bank rigging of foreign exchange: allegations 'as bad as Libor', says regulator
The Libor interest rate scandal led to banks paying $6bn in fines. Martin Wheatley, the head of the Financial Conduct Authority (FCA), told MPs that 10 banks were now helping with its investigation into the rigging of the foreign exchange markets. Traders are alleged to have colluded in setting certain key exchange rates in the £3bn-a-day forex market. Wheatley revealed that the FCA's probe had now widened, and "a number of other benchmarks that operate in London" were being investigated "because of concerns that are being raised with us". Other regulators around the world are also investigating possible manipulation of foreign exchange rates, but London's position at the centre of the market makes the FCA's investigation particularly significant. Several banks, including RBS and Barclays in the UK, have launched their own internal investigations and already suspended foreign exchange traders. Mr Wheatley told the committee of MPs that it was unlikely that the FCA's investigation would reach any conclusions this year. "I hope that we will next year... We are still in the investigation phase." BBC NEWS

Lloyds Banking Group 'April share sale likely'
Lloyds has confirmed it plans to return more of the government's 32.7% stake to private investors. But the news came as it made yet another hefty provision of £1.8bn for mis-selling payment protection insurance (PPI) taking its total to £10bn. For all banks the bill is approaching £20bn, a compensation payout so large it has noticeably helped stimulate high street spending and growth. Lloyds has a market value of about £57bn, so at the current share price of 79.66p, selling 10% would raise £5.7bn. This share price is more than 56% up over the last 52-week period. The government paid 73.6p for its stake. BBC NEWS


MARCH 2014

Lloyds accused of short-changing PPI claimantsLloyds Banking Group has been cutting the compensation it pays to payment protection insurance (PPI) claimants, saving itself more than £60m a BBC investigation has revealed. Lloyds cites a little-known regulatory provision called "alternative redress". This allows a bank, in specified circumstances, to assume that customers to whom it wrongly sold single-premium PPI policies would have bought a cheaper, regular premium PPI policy instead. BBC NEWS

‘FTSE 100 is trading at 9000’ was not true: Santander fined £12.4m for mis-sold investments
The fine comes after the regulator conducted a year long mystery shopping exercise in 2012 across the UK’s banking sector. The watchdog said it had unearthed shortcomings in the Spanish-owned bank’s advice on Isas, pensions and investment plans. In a 53-page report a series of failures are highlighted by the regulator. The most eye-catching and disturbing is that financial advisers working at Santander branches incorrectly told customers the FTSE 100 was trading between 8000 and 9000 at the height of the financial crisis in 2008. At the time the UK’s main stock market index was trading at just over 5000. Other misleading advice statements included customers being told their investments would probably double, while others were told their investment returns were guaranteed. Overall the mystery shop found 22pc of advisers provided misleading product information, while 28pc gave misleading answers on costs. TELEGRAPH

Vince Cable warns 30 biggest firms over executive payouts
The business secretary Vince Cable’s intervention comes after a string of banks revealed lavish rewards for their top staff despite weak results. Barclays announced it would pay 481 employees £1m or more after a year when profits fell by a third and shareholders' dividends were flat; top managers at Lloyds will share £27m in bonuses even though the bank – 33% owned by the taxpayer – remains engulfed in mis-selling scandals. British bosses now earn 133 times more than the average pay of their workforce, according to the High Pay Centre, and top pay has quadrupled in the last decade. Cable is concerned that some companies are ignoring the spirit of sweeping reforms introduced in 2013 to promote transparency in the boardroom. Shareholders now have a binding vote on remuneration policy once every three years and companies must take into account the pay and conditions of the average employee when setting executive pay. Cable’s calls for further reform are set to cause alarm among some shareholder groups while annual reports revealing this year's pay are still at the printing presses. GUARDIAN

Bank of England report overturns economic orthodoxy: private banks DO print money
A report by three economists from the Bank of England’s Monetary Analysis Directorate states outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. The conventional view, which continues to be the basis of all respectable debate on public policy, is that people put their money in banks which then lend that money out at interest. Furthermore, the “fractional reserve system” permits banks to lend out a multiple of what they hold in reserve. What the Bank of England economists admitted this week is that none of this is really true. To quote from its own initial summary: "Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits". In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This in effect pumps IOUs disguised as real money into the economy, and is considered a cause of the global banking crisis. GUARDIAN

JPMorgan whistleblower gets $63.9 million reward in mortgage fraud deal
A whistleblower, Keith Edwards, will be paid $63.9 million for providing tips that led to JPMorgan Chase & Co's agreement to pay $614 million and tighten oversight to resolve charges that it defrauded the government into insuring flawed home loans. In February JPMorgan admitted that for more than a decade it submitted thousands of mortgages for insurance by the Federal Housing Administration or the Department of Veterans Affairs that did not qualify for government guarantees. JPMorgan also admitted that it had failed to tell the agencies that its own internal reviews had turned up problems. The government said it ultimately had to cover millions of dollars of losses after some of the bank's loans went sour, resulting in evictions and foreclosures nationwide. Edwards, a Louisiana resident, had worked for JPMorgan or its predecessors from 2003 to 2008, and had been an assistant vice president supervising a government insuring unit. The US Justice Department said it had paid out roughly $1.98 billion of whistleblower awards from 2009 to 2013.REUTERS

Banks may be 'hindering' small businesses, says OFT
The OFT also says some banks are still failing to conform to a previous investigation by the Competition Commission 12 years ago. That inquiry found that banks sometimes required customers to open an account as a condition of receiving a loan. The OFT says there is evidence that this practice - known as "bundling"- is still occurring. Business Secretary Vince Cable said that small businesses still face problems with banking. "SMEs feel they have too few lending options other than the big four banks, which is not healthy for the economy," he said. "The picture of concentrated ownership and excessive profit margins from SME banking described in the 2000 Cruickshank Report remains largely unchanged," he added. BBC NEWS

The tricks insurers and retailers use to sell poor value insurance
The City watchdog, the Financial Conduct Authority (FCA), has labelled “add-on” insurance products such as gadget, home emergency and personal accident cover poor value for money and warned customers are being overcharged by up to £200m a year. The FCA has proposed a shake-up of the £1bn general insurance add-on market, which it said sees customers “as pound signs”. TELEGRAPH

Lloyds bank boss handed £900,000 in shares to sidestep EU bonus cap
Controversy over the EU bonus cap escalated on Wednesday when bailed out Lloyds Banking Group handed its chief executive £900,000 in extra shares to sidestep the attempted clampdown on pay and Barclays prepared to do the same for its boss. António Horta-Osório – whose total pay in 2013 was £7.5m – is receiving the shares on top of his £1.1m a year salary to ensure he does not suffer a fall in his earnings as a result of the cap, which restricts bonuses to 100% of salary, or 200% if shareholders approve. Other executive members of the board are also receiving the extra allowances of shares, along with up to 75 other top staff. The government owns 33% of Lloyds shares. GUARDIAN

Bank of England employee suspended amid £3tn forex rigging investigation
The Bank of England suspended a member of staff in connection with its own review of the £3tn a day forex market and began a formal inquiry into whether its staff knew about potential market rigging. The Bank took the unusual step of releasing minutes of meetings held over six years between Bank officials and a group of foreign exchange traders. The meetings were held at restaurants across the City and attended by the major foreign exchange traders from 10 or so major banks. At one meeting in April 2012 a senior trader had made notes showing that Bank of England officials did not believe it was improper to share customer orders. London accounts for 40% of the trade in the foreign exchange market. GUARDIAN

Bank of England's new plans mean reckless bankers could be stripped of bonuses even after they have cashed them in
Under current rules, banks can only claw back deferred bonuses which have been awarded but not yet been cashed in. Once the cash or share bonuses have been pocketed, they are beyond reach. If the proposals are adopted, banks will be forced to swiftly re-write their pay rules. Governor Mark Carney said the regulator will also consider proposals from the banking commission to force bankers to wait up to a decade to receive their deferred bonuses, rather than a typical period of three years. Mark Garnier, Conservative MP and member of the Treasury Select Committee, said: ‘The longer the bonuses are deferred the more skin bank bosses have in the game – this is the only way to get them to behave. DAILY MAIL

Claims Management Firms pocket £5bn of PPI victims' compensation
Citizens Advice chief executive Gillian Guy said: "Consumers have lost out on billions of pounds worth of compensation because banks were too slow to get a grip on the PPI scandal. By banks originally dragging their feet and providing inadequate redress, claims management companies seized an opportunity to take up to 25% of people's compensation for admin work that consumers can do themselves for free.” Template letters that people can use to complain are widely available online. Citizens Advice carried out consumer research suggesting that nearly one third (28pc) of people who have used a claims management firm felt under pressure to pursue a claim. Nearly two-fifths (39pc) of people who had used a claim firm said they were not aware they could have made the claim themselves, according to a survey of more than 5,000 Britons. Meanwhile, almost half (47pc) of people who used a claim firm said if they had known about the free help available they would not have used the firm. TELEGRAPH


APRIL 2014

Vince Cable warns businesses on 'ridiculous' pay awards
As firms prepare for their annual general meetings, Business Secretary Vince Cable has written to all FTSE 100 members to remind them that pressure on pay awards must be kept up to assuage public anger. He said pay levels at banks in particular had been "ridiculous". He singled out Barclays, which has its shareholder meeting scheduled for Thursday. Last year, Mr Cable introduced rules forcing listed firms to give shareholders a binding vote on directors' pay to make a "clearer link between pay and performance". The move followed investor anger over rising boardroom salaries at a time of falling share prices and sluggish earnings. "A lot of trust has been lost, because of the extremes of what happened in 2010, when pay escalated massively unrelated to the performance of companies," Mr Cable said. His letter on pay follows a series of corporate reforms announced by Mr Cable in recent days, including a public register in which companies will have to list their true owners, and a crackdown on "rogue directors". BBC NEWS

Barclays boss Antony Jenkins under fire for hiking bonuses as profits fall
The Institute of Directors has accused Barclays of not acting in the interests of shareholders after hiking its bonus pool by 10 per cent to £2.4billion – despite a 32 per cent drop in profits. Almost 2.5 times more was paid in bonuses than in dividends, with the IoD in February urging ‘supine’ institutional investors to protest against the bank. The IoD’s head of corporate governance Roger Barker said the bank’s charm offensive with investors and the ejection of remuneration committee chairman Sir John Sunderland has failed to mollify its concerns. Barker said he expected a ‘significant protest vote’ from shareholders at the AGM on Thursday.DAILY MAIL

Pay booms for building societies' chiefs as millions of savers are hit with more than 1,000 interest rate cuts
Last year there were 1,015 rate cuts to building society savings accounts, compared with only 75 in 2012. The sharp increase was a result of building societies being able to obtain cheap money from the Government’s Funding for Lending Scheme, which meant they didn’t need to attract money from savers. But the resulting financial pain suffered by millions of savers – with many depending on the interest to boost retirement income – was not shared by those who occupy the boardrooms of organisations that are supposed to belong to members. Just under half of chief executives, 13, enjoyed double-digit percentage increases to their pay packages. Bar a few honourable exceptions who waived bonuses because of the tough economic climate, nearly all the bosses received increases far in excess of both general inflation and wage inflation. DAILY MAIL

Car insurance small print 'longer than a novel'
Small print on some car insurance policies has a higher word count than George Orwell's novel Animal Farm, the consumer website Fairer Finance has found. The motor insurance policy documents produced by Endsleigh, Sheila's Wheels, Esure and M&S Bank run to more than 30,000 words. In contrast, insurer LV had terms and conditions of fewer than 7,000 words. A survey found that fewer than a third of customers read the terms and conditions. Similarly, the small print for an HSBC bank account totalled more than 34,000 words while Metro Bank, NatWest and Halifax all had word counts of more than 25,000. BBC NEWS

Are high frequency traders rigging stock markets? Split-second sharks accused of profiting at expense of ordinary investors
US financial firms are being accused of using speed - an advantage of just a few thousandths of a second - to fleece big money rivals and by extension ordinary savers and investors. The allegations have prompted the US Justice Department to say it is probing high-speed trading for possible insider trading violations. The FBI and US financial watchdogs are also investigating the industry. The book focuses on Wall Street share trading, but one City insider has commented: 'The same players are in the UK and Europe – if it’s happening in America, it’s happening here too.' DAILY MAIL

Barclays settles with Guardian Care Homes in Libor-linked court case
Barclays has settled a £70m Libor court case that will spare its former boss Bob Diamond and other senior colleagues from testifying in a lawsuit that the bank had been vigorously defending. Guardian Care Homes had alleged that the bank had mis-sold it two interest rate swaps worth £70m that were linked to Libor, the benchmark interest rate used to price financial products worth about £300tn around the world. The case was being watched closely by the banking industry, which is already making compensation claims to customers mis-sold interest rate swaps, amid fears that it could encourage more customers to bring cases linked to Libor. Diamond, who is now building a banking business in Africa, left Barclays in July 2012 in the wake of the furore caused by the bank's £290m fine for rigging Libor. GUARDIAN

73% of financial advisers fail to explain their charges, regulator finds
The Financial Conduct Authority's latest review into disclosure by financial advisers found that "too many" were not being clear on how much advice costs and whether they were "restricted" or limited in the sorts of investments they can advise on. The review found that 73pc of advisers failed to provide information on their costs. The failings were "widespread" and were more prevalent among wealth managers and private banks. TELEGRAPH

Bring back Dad's Army banks, says George Osborne
Chancellor George Osborne has hailed Captain Mainwaring as a role model for today's bank managers. He said the bumbling Dad's Army character was at the centre of his community and knew all of his small business customers.  Asked about Lloyds Bank's recent decision to axe half of its small business advisers, with the loss of 1,000 jobs, Mr Osborne said banks should be focusing on building closer relationships with their customers. He singled out two relatively new banks to the UK - Handelsbanken and Metro Bank - as leading the way. Handelsbanken is Sweden's biggest bank and now has 170 branches in the UK. It specialises in "traditional" banking, with customers having a more active relationship with their bank manager. Osborne said of Captain Mainwaring: "the bank manager was at the very centre of local life, knew all the businesses, knew the people who ran the businesses and was empowered to make judgements about who had a good idea, who maybe had had a couple of failures in the past - but that wasn't their fault - and had a good idea going forward.” BBC NEWS

At last! Rip-off pension charges capped at 0.75%
Rip-off charges which can wipe out more than a third of the value of a worker’s pension pot will be banned next year. Pensions Minister Steve Webb described the crackdown in which charges will be capped at 0.75 per cent as ‘a full frontal assault on poor value for money’. Over the next ten years, workers who diligently save into a pension will be around £200million better off as a result of yesterday’s announcement. This is because the money will go into their pension pots, rather than being siphoned off in high charges by well-paid fund managers. DAILY MAIL

Bank fines pass $100bn in the US
While UK fines have not even passed £700m, Wall Street banks and their foreign rivals have paid out $100bn in US legal settlements since the financial crisis, according to Financial Times research, with more than half of the penalties extracted in the past year. The sum reflects a substantial shift in political attitudes towards banks, as regulators and the Obama administration seek to counter perceptions that bankers have got off lightly for their role in the financial crisis. The milestone comes amid signs that banks’ legal costs could rise further, with a number of large banks still under investigation by the task force set up by Barack Obama in 2012 and the political backlash still under way. FINANCIAL TIMES


MAY 2014

Bank of England governor: capitalism doomed if ethics vanish
Capitalism is at risk of destroying itself unless bankers realise they have an obligation to create a fairer society, the Bank of England governor has warned. Mark Carney said bankers had operated a "heads-I-win-tails-you-lose" system. He questioned whether traders met ethical standards and said that those who failed to meet high professional standards should face ostracism. Speaking at a City conference, the Bank's governor warned that there was a growing sense that the basic social contract at the heart of capitalism was breaking down amid rising inequality. "We simply cannot take the capitalist system, which produces such plenty and so many solutions, for granted. Prosperity requires not just investment in economic capital, but investment in social capital." In a strongly worded critique of City behaviour in the run-up to the financial crisis, Carney said market radicalism and light-touch regulation had eroded fair capitalism, while scandals such as the rigging of Libor markets had undermined trust in the financial system. "Just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself. To counteract this tendency, individuals and their firms must have a sense of their responsibilities for the broader system." GUARDIAN

The rich get richer: Britain's wealthiest DOUBLE their fortunes since the financial crash and are now worth £519billion
The fortunes of the 1,000 richest men and women in the UK rose by 15.4% in the last year. It also means that total wealth has doubled since 2009, when the top 1,000 were worth a measly £258billion. The figures were revealed in the Sunday Times Rich List. The list is based on 'identifiable wealth' - including land, property, other assets such as art and racehorses, or significant shares in publicly quoted companies. It excludes bank accounts, which the Sunday Times has no access to. Figures released by the Office for National Statistics last week revealed that there is a monumental gap between the rich and the poor in the UK, with the wealthiest 1 per cent owning the same amount as the 55 per cent poorest in the UK. DAILY MAIL

New RBS finance chief handed £1.9m 'golden hello' reigniting controversy over bankers' 'fat cat' pay
Ewen Stevenson was awarded 584,506 shares on his first day in the job on Monday to compensate him for payments he forfeited at his previous employer Credit Suisse. RBS shares are currently worth 326p each, up 2.3p on the day. Stevenson will enjoy an annual package of £1.9million a year, including a £800,000 salary, £280,000 in pension contributions, and £26,250 in benefits. He will also receive a controversial £800,000 fixed shares ‘allowance’, used by banks including RBS to swerve the EU bonus cap. Stevenson was recruited after Nathan Bostock resigned in December to join Santander UK after just ten weeks in the role. The revelations turn up the heat on the state backed bank, which is still 81 per cent owned by the taxpayer and slumped to a £8.2billion loss last year. RBS was accused of wasting taxpayers’ money after handing a £3.2million ‘golden hello’ to current chief executive Ross McEwan when he joined as retail boss of the bank in August 2012. The Government last month blocked RBS from paying bonuses twice the size of salaries - but approved the new pay measure at Lloyds. DAILY MAIL

Global Swiss bank pleads guilty to helping 'tax cheats', fined $2.6bn by US regulator
Credit Suisse’s $2.6bn payment is the highest in a US criminal tax investigation to date. However, as part of the agreement with US regulators, the bank will not lose its banking licence in the US. US attorney general Eric Holder said: "The bank went to elaborate lengths to shield itself, its employees, and the tax cheats it served, from accountability for their criminal actions... They subverted disclosure requirements, destroyed bank records, and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds." Since 2011 US authorities have indicted eight Credit Suisse employees who helped clients evade taxes. US prosecutors are also chasing more than a dozen other Swiss banks for allegedly helping wealthy Americans dodge US taxes, and at the press conference, they hinted that there would be more settlements to come. In 2009, another Swiss bank, UBS, settled similar charges with US regulators for $780m as well as an agreement in which the bank would give US authorities the names of its so-called "secret" account holders.BBC NEWS

Minister warns booming house prices are destabilising UK economy
Business secretary Vince Cable has warned booming house prices are destabilising the economy and any sane person should worry about what is going to happen when interest rates rise as the economy returns to normal. He also warned that household debt in relation to income is set to become significantly higher in the UK than almost anywhere else, and contains serious dangers that represent "a real, real, real worry" for policymakers and homeowners. He said levels of household debt were forecast to surpass those reached before the financial crash in 2008. His comments have emerged as a study predicted that one in 10 mortgage payers risk becoming trapped on unaffordable deals as interest rates rise over the next four years. GUARDIAN

Backlash over banks' fee-paying accounts: Complaints triple amid fears of new mis-selling scandal
Around 9m people have a packaged account in the UK. But in an echo of the payment protection insurance (PPI) scandal, many are paying for perks they never knew existed, do not want or cannot benefit from. As a result, thousands of customers that have paid up to £300 a year for the perks have had their complaints routinely rejected by the high street banks, forcing them to take their case to the independent disputes arbitrator, the Financial Ombudsman Service (FOS). 78% of these complaints were upheld in the customer's favour after being rejected by the bank. Banks are keen to sell them because they are far more profitable than ordinary current accounts, which are free if in credit. Typical packaged account benefits include travel insurance, breakdown cover and mobile phone insurance. Some also offer free music downloads or free National Trust days out. But pensioners, for example, may find they are unable to claim on their travel insurance policy because the small print contains an age limit of 65. The FOS said a growing number of complaints are from customers who said their accounts had been 'upgraded' without their knowledge. The total number of all complaints against banks were up by 1% on the previous year to a record of 512,167. Banks have already paid out over £14bn in compensation for mis-selling PPI to customers. Critics say the level of customer discontent over packaged accounts shows that the banks have a 'rotten culture' and that lenders may become embroiled in a new mis-selling scandal. DAILY MAIL

UK's second-biggest High Street payday lender exits the market, following pressure from the regulator
Cheque Centre had been accused of poor practice in the way it treated customers in debt. The lender is based in Edinburgh, and has 451 branches across the UK. It said it would now concentrate on other business like foreign currency, longer-term loans and pawn-broking. It has also agreed to suspend all telephone calls to customers who owe money, following an agreement with the Financial Conduct Authority (FCA). Tougher rules on payday loans were introduced by the FCA when it took over as the regulator of the payday industry last month. "This is an early victory for people that use payday lenders," said Martin Wheatley, the FCA's chief executive. When it took over as the regulator, the FCA said it expected that up to a quarter of payday lenders might leave the market. BBC NEWS

'Free retirement advice' promised in the Budget will NOT be free and savers must be told, MPs warn
As part of the overhaul, the Chancellor pledged that all pension savers would have access to free and independent advice from qualified financial professionals. However a report on the Budget from the Treasury Select Committee revealed today that the advice would be ‘free at the point of use’. This means that although pensions companies and the industry will not charge savers upfront for advice, the costs will ultimately be passed on to savers. Since the advice will be mandatory, it means any savers who choose to seek advice from an independent financial advisor as well will end up paying for advice twice. DAILY MAIL

Banks say bonus clawback rules may be unenforceable
Britain's banking lobby has warned that proposals to claw back bonuses up to 11 years after they have been awarded would be unfair and potentially unenforceable. In a response to proposals from the Bank of England’s Prudential Regulation Authority (PRA), the British Bankers’ Association (BBA) said some of the suggestions violated “fundamental and long-standing” tenets of British law, and were “going beyond what could be considered as fair and reasonable”. In March, the PRA launched a consultation on tough new pay rules that could see banks clawing back bonuses six years after they have been paid if bankers misbehave or if their company enters a “material downturn” in financial performance. With regulators also looking at bonuses not vesting until five years after they have been awarded, this would mean they could be clawed back as much as 11 years later. TELEGRAPH

'This is a movie we've seen before': House price boom poses greatest threat to financial stability, warns Bank of England deputySoaring house prices pose the greatest threat to Britain’s financial stability, the deputy governor of the Bank of England has warned. It would be ‘dangerous’ to ignore the momentum building up in the UK housing market, Sir Jon Cunliffe cautioned, predicting that it is not out the question the market could be heading for a crash. The Bank of England will have to decide in coming months whether to cool the recovery, he said, in the sternest warning from the Bank of England to date about surging British house prices. His comments came on the same day that new figures revealed house prices jumped another 10.9 per cent year on year in April, marking the first time since April 2010 that annual growth has reached double figures. DAILY MAIL

Buy-to-let landlords got an annual return of 16.3% since 1996, dwarfing other investments
Buy-to-let investors have made £12,000 profit on every £1,000 they put into property since mortgages for landlords were first launched in 1996. This annual return of 16.3%, buoyed by fast-rising house prices and rents, far outstripped every other type of investment. Over the same period shares would have earned investors 6.8% a year, bonds 6.5% and savings in the bank 4%. Critics say landlords have elbowed first-time buyers aside, pointing to the fall in home-ownership levels in the UK since their peak a decade ago. The proportion of homes lived in by owner-occupiers had fallen to 65.2%, down from 71% in 2003 and at its lowest level since 1987. Alex Hilton, director of Generation Rent, set up to represent Britain's 9 million renters, said: "While a 16.3% annual profit makes the UK buy-to-let market a hugely lucrative investment for landlords, it's time to count the cost to their captive tenants. It drives up rents and kills the dream of home ownership for millions of tenants, but worse than that, our ComRes poll in March showed that a third of tenants are cutting back on food and two fifths are cutting back on heating – just so they can pay their rents. If retailers hoarded food as a limited resource and profiteered from the consequent price rises, there would be riots on the streets. The buy-to-let market is doing to tenants is having the same effect. People are going hungry so that other people can get rich quick." GUARDIAN

Osborne blocks taxpayer-owned RBS from doubling bonuses (but staff will still get payouts worth a YEAR'S salary)
Royal Bank of Scotland has been banned from paying bankers bonuses worth twice their salaries by the government. The Treasury said the huge payouts could not be made while the troubled lender was still part-owned by the taxpayer. But staff at RBS will still receive bonuses worth an entire year’s pay, and 77 people will be paid more than £1million. The troubled bank reignited the row over pay in February when it revealed plans for huge bonuses, including £237million for its investment bankers, despite slumping into the red with an £8.2billion loss. DAILY MAIL

Barclays AGM - shareholders large and small protest over pay and bonuses
One in three shareholders failed to support the bank's remuneration report, which showed that bonuses rose 10% despite a 32% fall in profits. The Barclays chairman, Sir David Walker, had promised a year ago to restrain top pay. One private investor, who expressed his irritation at the bank's dividend payments, poor performance and £5.8bn cash call to bolster its finances last year, told the packed AGM: "We're paying for Manchester United but we are getting Colchester United." Annual investor meetings are usually dominated by private shareholders who hold small amounts of votes. But one major City investor, Standard Life Investments, which owns almost 2% of Barclays, spoke out to say it had voted against the pay deals. Alison Kennedy, a director at Standard Life Investments, told the board: "We are unconvinced that the amount of the 2013 bonus pool was in the best interests of shareholders. Walker tried repeatedly to defend the bonus payouts, which resulted in 481 Barclays' bankers being paid more than £1m last year. GUARDIAN

Invesco Perpetual fined £18m for 'failures' which left small investors at risk
Asset management group Invesco Perpetual has been fined £18.6m after City regulators uncovered a string of failures at the firm which left small investors at risk of significant losses. The FCA was investigating the period between May 2008 and November 2012. The FCA found £1bn-worth of leveraged trades were carried out by Invesco fund managers, using complex derivatives, without disclosing the risk to small investors. GUARDIAN


JUNE 2014

Barclays shares fall 6.5% on new fraud accusation
The New York attorney general has filed a fraud lawsuit against Barclays. The lawsuit alleges the bank falsified documents and misrepresented benefits it was offering to big institutional clients, including pension funds. It relates to the bank's "dark pool" trading operations, which allow clients to trade large blocks of shares while keeping prices private. Barclays has begun an internal probe into the allegations. In an email to staff, Barclays chief executive Antony Jenkins said: "I will not tolerate any circumstances in which our clients are lied to or misled and any instances I discover will be dealt with severely.” Barclays has been the subject of several investigations, fines and settlements in recent years. In May it was fined £26m by UK regulators after one of its traders was discovered attempting to fix the price of gold. In April, Barclays agreed to a $280m (£167m) settlement with the US Federal Housing and Finance Authority (FHFA), which claimed that Barclays misled US mortgage lenders Fannie Mae and Freddie Mac during the housing crisis. In 2012 it was fined £290m by UK regulators for attempting to manipulate an important lending rate, known as Libor. BBC NEWS

Furious investors attack WPP and RBS over excessive bonuses and pay
Nearly 30% of shareholders at the advertising group WPP refusing to endorse a plan that allowed founder Sir Martin Sorrell to receive a £30m windfall last year. Meanwhile, the Royal Bank of Scotland chairman Sir Philip Hampton was forced to defend the bank's bonus schemes, admitting: "Pay in the financial sector, particularly banks, got out of line with other sectors and more importantly the underlying performance of the business... Ultimately taxpayers picked up some of the bills for that." But all RBS resolutions were overwhelmingly passed after the UK government voted its 63% stake in favour of the necessary resolutions. The Treasury had previously forced the state-owned bank to scrap plans to pay its bankers bonuses twice the size of their salaries, but nodded through plans to hand executives payouts of up to 100% of basic salary. GUARDIAN

Credit Suisse and Yorkshire BS fined for selling financial product with “close to zero” chance of success
Credit Suisse designed a product, called "Cliquet", to provide a minimum return, with the apparent potential for getting back significantly more if the FTSE 100 performed consistently well. Both the banks had promoted the products' potential maximum return, which investors had almost no chance of getting, the Financial Conductor Authority (FCA) said. The FCA said that the probability of getting back a minimum return was between 40% and 50%, while the chance of a maximum return was "close to 0%". The product was sold to 83,777 people, typically people with limited investment experience. Tracey McDermott, FCA's director of enforcement and financial crime, said: "CSI [Credit Suisse] and YBS knew that the chances of receiving the maximum return were close to zero but they nevertheless highlighted this as a key promotional feature of the product. This was unacceptable." BBC NEWS

Osborne to lay out plans to clean up Wild West foreign currency market
Chancellor George Osborne is asking regulators to lead a review, including crucial benchmarks used to set everything from currency rates to the price of oil. The aim is to then introduce statutory regulation to keep traders and brokers in check. With the general election fast approaching, Osborne is anxious to appear tough, particularly after lambasting the previous government for being lax on regulation and asleep at the wheel during the financial crisis. Regulators have predicted that allegations traders have rigged the foreign currency markets could – if proven – be an even bigger scandal than Libor, when traders fixed the inter-bank lending rate. David Buik from broker Panmure Gordon said forex could make Libor and PPI look like a ‘vicarage tea party’. Regulating this sprawling market will be a Herculean task. The forex, or FX, market is the biggest in the world, with an estimated £3trillion changing hands each day. Yet it is not regulated, with one market insider who blew the whistle on foul play by corrupt traders memorably comparing FX to the Wild West. Prices tend to be set by traders involved in the deals, allowing plenty of scope for manipulation by those wanting to rig their bets and boost their bonuses. The global investigation into allegations traders rigged foreign currency markets strikes at the heart of the City of London – still reeling from the Libor scandal. London accounts for 40 per cent of the FX market, with Deutsche Bank, UBS, Citigroup, and Barclays the dominant players. It has been reported that 15 banks around the world are involved in wrongdoing, with around 40 traders suspended so far. DAILY MAIL

Britain's two-tier property market: London alone has prices above pre-2008 peak and more than double the rest of the country
House prices in London are nearly 25 per cent higher than their pre-recession peak and more than double the average for the rest of the country. The Office for National Statistics said a typical home in the capital is worth £459,000 – 24.8 per cent more than in January 2008. But prices across the rest of the UK are still 2.4 per cent lower than they were before the crisis, at £195,000, despite a rise of 5.1 per cent in the past 12 months. Prices across much of the North are still around 8 per cent lower than they were before the recession. The ONS warned rising prices could mean ‘rising levels of indebtedness’ as buyers are forced to take on bigger mortgages, leaving them ‘vulnerable’ to higher interest rates. It said this could make the economy less able to ‘withstand further shocks’. Experts said the figures highlighted the divide between London and much of the rest of the UK, with a ‘two-speed’ housing market developing. DAILY MAIL

British retailers set to take on payday lenders with employee credit union that will offer cheap loans
In a bid to offer an alternative to the hefty interest rates charged on payday loans, New Look and Next are among names to have signed up to RetailCure. The credit union is for people working in the retail sector. RetailCure is expected to charge interest from roughly 7 per cent to nearly 28 per cent depending upon the borrower's credit history. People who borrow £400 over 30 days from a payday loan firm are stung with an interest fee of around £127, while the same loan would cost just £8 from the credit union. Veteran retailer John Lovering, who has led buyouts of companies including Debenhams, Homebase and Somerfield, will chair the organisation, which is set to be launched later this year. He told Sky News: 'The industry feels that we have to find a way of providing a source of cheap, reliable credit for our people... The three million in retail and the nearly five million in the wider industry do have a need for low-cost, value-for-money, short-term borrowing facilities, and that's what we as an industry are trying to provide.' DAILY MAIL

Get ready for a 'savings crunch': Rising cost of living and a return to pre-crisis spending will push us back to 1960s levels
Despite a growing optimism that the economy has turned a corner, the amount of money available for households to save is in decline, according to the Future of Savings study by the Post Office and the Centre for Economics and Business Research. The report - which looked at changing trends in savings over the last 50 years – says the average amount available to save will fall from £3,780 last year to £3,630 in 2014 – this, once adjusted for inflation, is similar to that seen in the 1960s. That figure will continue to fall to £2,944 by 2018. In 2010, the figure was a 33 per cent higher at £4,414. While spending is good for the economy, the reality of the situation is people are not saving enough, the report says - and Britain is in danger of returning to pre-recession spending habits. Perhaps unsurprisingly, the wealthiest 40 per cent does almost all of the nation’s saving, with more than £18,000 available to put into savings. In comparison, the lowest income households are not saving at all, and haven’t done consistently from 2002. The Cebr predicts by the end of 2014 this group will end the year with no savings and an average debt of £1,910. The worst hit is the North West where almost a third expect to save a lower proportion of their income. It’s a different story in London, however, with those who save hoping to deposit a higher proportion of their income than they did last year. DAILY MAIL

PPI: Compensation payouts could have £1bn shortfall
Some leading banks may have underpaid compensation certain customers are due for mis-sold Payment Protection Insurance. One expert, commissioned by the BBC, estimates it could amount to "somewhere in the region of £1bn". The customers potentially affected had PPI on credit cards issued by Lloyds Banking Group, Barclays, MBNA and Capital One. The shortfall in compensation arises because, although these banks all refunded the premiums on their mis-sold PPI policies plus interest as regulators require, they have been failing correctly to refund additional charges which were triggered by the premiums of the mis-sold PPI policies. This failure to include fees and charges in compensation calculations has resulted in dramatic reductions to the amounts some customers have received. For example, Mark Pascoe was paid £5,800 of PPI compensation by the large credit card company MBNA. But MBNA's calculations did not include just over £600 in fees and charges Mr Pascoe incurred since taking out his card in 1997. BBC NEWS

UK banks 'still vulnerable to next financial crisis'
Britain is still unprepared for another financial crash and its banks have yet to strengthen their reserves sufficiently to survive another crisis, according to a senior Bank of England official. Richard Sharp, a member of the central bank's financial policy committee (FPC), which monitors risk in the financial sector, added that the economy remains weak and vulnerable to external shocks. In a speech at the London School of Economics, he said the Bank's policy of quantitative easing and maintaining low interest rates, combined with similar policies in the US and Japan, could also cause problems as investors attempt to predict how and when cheap credit will be withdrawn. He was concerned that measures to boost demand, such as low interest rates and quantitative easing were just raising asset prices and causing investors to hoard wealth, reducing economic activity. The warning shot is Sharp's first venture into public debate since joining the FPC last year. A former Goldman Sachs partner and private equity expert, Sharp is well-known in government circles after George Osborne recruited him to be one of four City figures to "question the unquestionable" as part of the Treasury's austerity drive.GUARDIAN


JULY 2014

Regulators want reckless bankers to be criminally liable under new plans
The bosses of leading City firms are to be made more accountable for their actions under proposals that could make them wait up to seven years for their bonuses and potentially be jailed if their banks fail. Responding to recommendations made by the parliamentary commission on banking standards, the two main City regulators on Wednesday set out lengthy consultations aimed at framing a new licencing regime for bankers and the creation of a "potential criminal liability under a new offence relating to a reckless decision causing a financial institution to fail". The Financial Conduct Authority and the Bank of England's regulation arm, the Prudential Regulation Authority, want the new regime to be in force by January next year and would force bankers to prove they had acted appropriately – a reversal of the burden of proof. Bankers would be subjected to annual checks to ensure they comply with a regime which covers those involved in what is known as a "significant harm function". But the regulators have stepped back from the idea of the parliamentary commission – set up in the wake of the Barclays' fine for rigging Libor two years ago – that bonuses be deferred for as long as 10 years. "The PRA and FCA note that increasing the overall length of deferral is not the only way in which the typical present pattern of deferrals might be altered to improve risk alignment. There is scope to increase the proportion of awards that are held for longer within the overall deferral period, either by requiring a greater proportion of awards to be deferred, or by delaying the start of vesting, which typically starts a year following the initial award," the regulators said. Instead, for the most senior bankers, bonuses must be deferred for seven years and for less senior staff for five years, according to the consultation. And the new rules coming into force will allow bonuses to be clawed back for up to 10 years. This would force bankers to repay bonuses already received as well as having deferred bonuses withheld. GUARDIAN

UBS and Deutsche Bank questioned over 'dark pool' trading
Two more banks – UBS and Deutsche Bank – have been drawn in to the controversy over "dark pools", the private trading systems recently highlighted by bestselling author Michael Lewis in his latest book on Wall Street. Dark pool exchanges are operated by banks and allow dealers to remain anonymous until their trades are executed. Lewis argues they are used by high frequency traders who try to make profits by trading faster than everyone else. Barclays is already defending itself against accusations of fraud by the New York attorney general over the way it advertised its dark pool. GUARDIAN

U-turn: RBS bosses 'wilfully obtuse' over alleged mistreatment of small firms
Senior directors at RBS have been strongly criticised for giving misleading evidence to MPs investigating claims that the bank mistreated small firms. An earlier report by Lawrence Tomlinson, a Government adviser, alleged that the bank’s Global Restructuring Group (GRG) division was forcing small businesses into administration so that the bank could take their properties and sell them for a profit. Another report by Sir Andrew Large concluded that there were potential conflicts of interest between GRG and its small business clients because the division was an “internal profit centre”. The former Deputy Governor of the Bank of England argued that GRG could be tempted to drive profits from clients rather than help them and turn them around, as the division was designed to do. In reply, giving evidence to MPs, RBS bosses had repeatedly insisted that GRG was not a “profit centre”. However, in a new letter to Andrew Tyrie, chairman of the Treasury Select Committee, deputy chief executive Chris Sullivan, who is leaving RBS next year, said he had to “correct the statement he made to the Committee” since he now agreed that GRG was indeed a profit centre. Mr Tyrie concluded: “If this is how RBS deals with a parliamentary Committee, how much can customers and regulators rely on it to be straightforward with them?” TELEGRAPH

Banks face new criminal investigation over foreign exchange market manipulation
The Serious Fraud Office 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. Regulators around the world, including the UK, US, Switzerland and Hong Kong, are already looking into alleged rigging of foreign exchange rates but the SFO’s intervention will mark the first official criminal investigation. London is where around 40pc 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 Bank of England has also been dragged into the affair - it has asked Lord Grabiner QC to look into whether any of its own officials were implicated in forex manipulation between 2005 and 2013. 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. TELEGRAPH

RBS chief says foreign exchange manipulation fines could costs banks more than Libor scandal
RBS paid $612m (£390m) last year to settle allegations that it manipulated Libor rates, one of several banks hit with big fines for rigging financial benchmarks. Regulators are now investigating allegations that traders manipulated key reference rates in the $5 trillion-a-day foreign exchange market. Asked if the foreign exchange (forex, or FX) investigation could be a bigger problem for the industry than Libor, RBS Chief Executive Ross McEwan said: "Unfortunately, it has the hallmarks". U.S. and European regulators have handed down about $6 billion in fines to 10 banks and brokerages, including UBS, Barclays and Deutsche Bank for alleged rigging of Libor and its euro cousin Euribor, and more banks are expected to be hit. But a number of industry analysts have said the combination of fines from investigations into forex manipulation in more than half a dozen jurisdictions worldwide, and the potential for suits by fund managers and other investors, could saddle banks with a bill several times costlier than Libor. REUTERS

FTSE fat cats now earn 180 times the average worker, as their salaries hit £4.7m a year
The gap between bosses and workers has soared over the past 20 years - from just 60 times the average wage in the 1990s. On average the bosses of Britain's 100 biggest companies took home £4.7million last year - up from £4.1million the year before, according to the High Pay Centre. Ordinary workers, meanwhile, earned £26,884. A Business Department spokesman said: 'The Government has introduced comprehensive reforms to give shareholders more powers in order to restore the link between top pay and performance, which in recent years has become excessive and increasingly disconnected.” But the High Pay Centre said shareholders were still signing off soaring executive pay despite being given the power to vote them down at annual meetings. They urged the government to take 'radical action' to close the gap, such as requiring firms to cap executive pay at a fixed multiple of their lowest paid employees. High Pay Centre director Deborah Hargreaves said: 'The Government's tinkering won't bring about a proper change in the UK's pay culture... We need to build an economy where people are paid fair and sensible amounts of money for the work that they do and the incomes of the super-rich aren't racing away from everybody else... A maximum pay ratio would recognise the important principle that all workers should share in a company's success and that gaps between those at the top and low and middle earners cannot just get wider and wider.' DAILY MAIL

Fleecing the elderly: home and car insurance price rises that shame the insurance industry
Over the last year, market rates for home and car insurance have plummeted. In Manchester, average car premiums are down by more than £100 and are heading back to rates last seen five years ago. So it is scandalous how insurers chase new customers with low prices while fleecing their elderly, more loyal ones. But there is now a glimmer of hope. If new proposals come into force, customers receiving their annual renewal on car or home insurance will have to be told what they paid last year. It's extraordinary that until now they have had to dig out old documents to see whether they're being shafted with a rise. Many people don't – allowing the insurers to sneak through rise after rise. In March 2008, we highlighted the case of Robert King who was quoted a home insurance renewal price of £551 by Direct Line. Yet when he went to its website, posing as a new customer, he was quoted £173. He had been a customer for 10 years. Ans an 83-year-old Derbyshire pensioner, living in a modest two-bed bungalow, had his home and contents policy with the same insurer for 58 years. It progressively ramped up his premium to £648 a year – yet if he bought it as a new customer it was just £135. So when you open your renewal letter, look for a premium that is lower than last year. If it's not, it's time to switch. GUARDIAN

Watchdogs in Britain accused of failing to shine spotlight on emerging 'dark pools' trading scandal
Giving evidence to the Treasury Select Committee, Bank of England officials including governor Mark Carney were admonished for lagging their counterparts in the US and Europe. In the US, Barclays was last month accused of ‘systemic fraud and deceit’ against its ‘dark pool’ customers by New York Attorney General Eric Schneiderman, who launched a lawsuit against the bank. In further evidence that US regulators are turning up the heat, Goldman was also fined £466,000 by the US Financial Industry Regulatory Authority earlier this month for failing to protect clients in its ‘dark pool’. In a salvo against Carney and the Bank’s Prudential Regulation chief Andrew Bailey, committee member George Mudie suggested similar urgency had not been evident among the UK watchdogs, including the Bank of England. So-called dark pools are secretive markets where people buy and sell stocks without disclosing information about the transactions. DAILY MAIL

Dirty tricks banks use to hide your savings rates: Scale of deception that strips savers of nearly £4billion a year in interest laid bare
An investigation by City regulator, the Financial Conduct Authority, into the UK’s £700 billion savings market found bank behaviour left customers routinely deprived of interest. It has now launched a further probe and has asked savers for evidence about how they are ripped off. Half of easy-access savers are currently in an account which pays — or has paid — a bonus or ‘teaser’ rate. These typically last a year, after which the rate can be reduced to almost nothing. Banks and building societies rely on their customers’ laziness or lack of knowledge to leave them on this low rate. On top of this, £353 billion is in easy-access accounts where the rate can be cut without warning. These savers could be losing out on as much as £3.74 billion a year in interest, compared with what they would make if they moved to the best deal available, paying 1.32 per cent (1.65 per cent). Over the past 24 months there have been more than 2,000 cuts on variable accounts.   And they are coming thick and fast.  Banks and building societies don’t have to write and let you know of any change unless it is ‘material’. That means they only have to do it if the rate falls by more than 0.25 percentage points in one go, or a total drop of 0.5 points or more in smaller cuts over a year.  A number of firms now use conditional rates where the interest  paid will depend on the customer sticking to rules. This can include being restricted to making a certain number of withdrawals or depositing a set amount. Make a mistake and the savings rate usually drops substantially. These and other techniques are likely to come under scrutiny by the FCA. DAILY MAIL

First Wonga, now banks, energy and water firms, and the Student Loan Company are caught sending fake bullying legal letters to collect debts
A major row erupted last week when it was revealed that payday loan giant Wonga had made up the names of two firms to harass people who were behind on loan repayments. It has now emerged that Barclays, Lloyds, Halifax, RBS and HSBC are among firms who have sent customers letters that look like they are from outside firms when they are not. The letters appear to be designed to put pressure on customers by making them believe requests for debt repayments have been passed on to third parties. Energy giant Scottish Power and Anglian Water, which supplies families in the East of England, are also using the letters. The Student Loan Company also uses the same tactic to chase graduates for their student loans, and it can now be revealed that the threatening tactics go well beyond the ‘legal loan sharks’ such as Wonga, with a string of household names using the controversial ploy. Wonga was ordered by the City watchdog, the Financial Conduct Authority (FCA), to pay £2.6million in compensation to the 45,000 people affected. The City of London police are investigating whether Wonga has broken one of several laws, ranging from the Theft Act to the Administration of Justice Act, which covers the harassment of debtors. DAILY MAIL

Consumers don't trust pension providers, says report
Consumers do not trust the pensions industry and equate investment with casino-style gambling, according to a report from the government's workplace pension scheme. National Employment Savings Trust (Nest) found that consumers wanted their pensions to be safe and reliable but they associated the industry with corruption and incompetence. The financial crisis had made people more wary of investing by increasing fears that their money could be lost. Nest said the findings were a worry given that auto-enrolment into workplace pensions had started and people retiring had been given greater freedom over what they do with their pension pots. GUARDIAN

PM's party for donors - with an £11bn guest list: Billionaires, bankers, and lobbyists among attendees at glittering dinner that gave them access to top Tories
A list of billionaires, bankers and lobbyists who received £12,000-a-table access to David Cameron and other senior Cabinet ministers was published for the first time last night. Documents seen by the Bureau of Investigative Journalism showed there were 73 financiers, 47 retail and property tycoons, ten people in oil, gas and mining and 19 attendees working in public affairs and PR. The documents revealed that almost 450 attendees at last summer’s glittering Tory fundraising dinner had a combined wealth of more than £11billion. They sat at tables costing up to £12,000 each alongside Mr Cameron, Home Secretary Theresa May, Defence Secretary Philip Hammond and London Mayor Boris Johnson. It is not known how much was raised from the 2013 event, but Electoral Commission figures show that since the ball, those present have donated £5million to the Conservatives. Of this, £1.1million was registered in the week after the event. Table sales raised at least £250,000, with cheaper tickets going for £400. The guest list for the private event last summer at Old Billingsgate Market in Central London included six billionaires and 15 people with a personal wealth above £100million. The revelation will give further ammunition to Labour, which wants to paint the Conservatives as the party of the rich. The Tory fundraising dinner is an annual event and this year’s will be held next Wednesday at the Hurlingham private members’ club in West London. DAILY MAIL

FOR A FASCINATING SEATING PLAN OF THE DINNER, VISIT Bureau of Investigative Journalism

Stiffer rules for payday lenders come into effect
Payday lenders will no longer be able to roll over loans more than twice or make continued raids on borrowers' bank accounts to recover their cash. The new rules are designed to deter lenders from offering loans to borrowers who cannot afford to repay them over the original term, and to protect those who struggle with repayments from incurring spiralling costs. Payday lenders, such as Wonga and the Money Shop, offer short-term loans arranged over days or weeks. They argue that annual interest rates in excess of 5,000% are misleading because debts are paid back before that much interest accrues, but charges can quickly add up if debts are rolled over or repayments are missed. Wonga said that 4% of its loans were extended once, 1.4% were extended twice, and only 1.1% had been extended three times, while 93.5% had never been rolled over. Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents some of the biggest payday lenders, said members were fully committed to meeting the new rules. But he added: “...if the regulator turns the screw too far and drives reputable lenders out of the market, these borrowers will be forced to look for credit elsewhere and this creates a perfect market for illegal lenders." GUARDIAN


AUGUST 2014

RBS fined £14.5m for poor mortgage records and advice
The financial regulator said two reviews of sales from 2012 found that in more than half the cases the suitability of the advice given to customers was not clear. Only two of the 164 sales reviewed were considered “to meet the standard required overall in a sales process”, the FCA said, and some advice was “highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them”. Moreover, the banks did not address the failings for almost a year when concerns were raised by the FCA’s predecessor in November 2011. Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “Taking out a mortgage is one of the most important financial decisions we can make. Poor advice could cost someone their home so it’s vital that the advice process is fit for purpose. Both firms failed to ensure that their customers were getting the best advice for them.” RBS still faces several claims over the alleged manipulation of the foreign exchange market; the sale of US mortgage-backed securities; small business lending in the UK; and the mis-selling of payment protection insurance and interest rate swaps. Martin Wheatley, the FCA’s chief executive, warned last month that more fines for UK banks were in the pipeline, and attacked the financial services sector for its capacity to “constantly surprise with bad conduct”. FINANCIAL TIMES

Serious Fraud Office probes banks accused of duping small firms over new government loan scheme
Banks are accused of misusing the Enterprise Finance Scheme set up to provide government-backed loans to small companies who cannot get access to traditional credit. The Serious Fraud Office (SFO) is looking at claims that banks have used the scheme to pass companies’ risky loans onto the taxpayer instead. It is also reviewing allegations that banks mis-sold these loans by duping customers into believing that they would only be liable to pay 25 per cent of the debt if their company failed. Launched in 2009, the Enterprise Finance Guarantee Scheme is designed as a lifeline for small and medium sized firms who lack the security to get a bank loan. Under the initiative, the Government guarantees to pay the bank 75 per cent of the loan if the borrowing business fails – making it less risky for the bank by transferring the risk to the taxpayer. But companies claim they were persuaded to take out these loans on the basis that the guarantee also covered 75 per cent of their own losses if their business failed. Firms which also had an overdraft and therefore should not have qualified for the scheme say they were persuaded to take out a government-backed loan on this basis - with the catch that their bank overdraft was cut or removed. DAILY MAIL

Workplace Pension fees merry-go-round: April 2015’s fee cap could save us £1bn, but pension providers threaten to recoup it through other charges, passed on by employers as lower salaries and dividends
The 0.75pc a year cap on charges will apply to workplace pensions linked to the stock market. It is a Government initiative to tackle “rip-off” levies that deplete customers’ savings. Ministers initially said this new ceiling would transfer £200 million from insurance company profits “into the pockets of savers”. But Royal London, which has 11m customers, calculated that the sum passed to savers by the industry would be “monumentally higher”. Phil Loney, CEO of Royal London, said: “We estimate the total reduction in long-term insurer income may well reach £1 billion.” Pension companies such as Royal London take annual fees for managing money saved into company schemes. The charges can range from below 0.5pc a year to more than 2pc. Reducing the higher charges to 0.75pc will allow savers’ funds to grow more quickly to the detriment of pension providers. But Mr Loney said the charges cap could do more harm than good, indicating that Royal London and similar providers might hit employers with supplementary fees. These would fall outside the 0.75pc government cap, which relates specifically to the management charges paid by staff. Tom McPhail, head of pensions at financial services firm Hargreaves Lansdown, said: “There could be a sort 'money-go-round’ where insurers put extra charges on employers, who pass these on to staff in the form of lower pay rises and to shareholders in the form of smaller dividends. If that happens there will be little overall benefit to the people the Government is trying to help.” Gina Miller, a campaigner for fairer investing and founder of wealth manager SCM Private, said: “The charges cap must include all implicit and explicit costs or it will be misleading”. TELEGRAPH

Standard Chartered fined $300m by US financial watchdog
The latest payment follows the bank's failure to tackle problems with its anti-money laundering compliance that the New York regulator required following an earlier $340m settlement in 2012. "If a bank fails to live up to its commitments, there should be consequences. That is particularly true in an area as serious as anti-money-laundering compliance, which is vital to helping prevent terrorism and vile human rights abuses," said Benjamin Lawsky, superintendent of the DFS. Lawsky alleged the British lender failed to catch millions of higher-risk transactions that should have triggered further investigation. Back in 2012 the British bank paid a $340m fine to the New York State Department of Financial Services (DFS) after it was accused of helping Iran launder about $250bn, keeping false records and handling lucrative wire transfers for Iranian clients. GUARDIAN

Osborne’s “cashing in” shakeup may lose pensioners £3.6bn in taxes, and cause new wave of mis-selling
In the last budget, Osborne said he would "remove all remaining tax restrictions" and give pensioners "complete freedom to draw down as much or as little of their pension pot as they want, anytime they want". But the tax implications of cashing in pension pots have only emerged in detail since the budget. Figures compiled by Hargreaves Lansdown indicate that someone with a £100,000 pension pot will pay £34,500 in tax if they take the money as cash on retirement. The Treasury is estimating that around 130,000 pensioners at retirement will take advantage of the new flexibility, with the pensions minister, Steve Webb, claiming that savers will be free to blow the lot on a Lamborghini, if they wish. Detailed figures released after the budget reveal that this “tax trap” for many pensioners will boost the Treasury coffers by £3.6bn between 2014 and 2020. Critics are now predicting a wave of mis-selling from April 2015, as pensioners are encouraged to cash in their pension pots to invest in buy-to-let property, unaware of the huge one-off tax charge they face. GUARDIAN

RBS bosses pocket disputed windfall: Bank hands out £3.5m in new fixed ‘allowances’ to top directors in a bid to beat bonus cap
Like its rivals, RBS has introduced fixed annual allowances – paid in two instalments – to swerve a cap on bonuses introduced by the European Commission at the start of the year. This bumps up basic pay packages, which are not subject to the restrictions. The EU-wide cap prevents banks from paying more than one year’s salary, rising to twice salary if shareholders approve. RBS was blocked by the Treasury from applying the higher limit. Deborah Hargreaves, chair of the High Pay Centre, said: ‘This goes against spirit of the rules, if not the letter... When RBS’s major shareholder – the Government – has voted against them paying twice their salary as a bonus it doesn’t seem right that they should be paying fixed allowances to get around that.’ Ten senior executives shared the windfall but the biggest winner was Rory Cullinan, the boss of the ‘bad bank’ set up at the start of the year to manage some £38billion of the most toxic assets. He was awarded £534,000 in shares for the first eight months of the year. Some £251,046 worth of shares were sold immediately to pay his taxes. The remaining award will be released over the next five years. Chief administrative officer Simon McNamara, head of conduct and regulatory affairs Jon Pain and chief risk officer David Stephen all received £400,000 before tax. Chief executive Ross McEwan has already waived his allowance. RBS made an £8.2billion loss last year. DAILY MAIL

Credit and loan agreement errors likely to trigger payouts approaching £1bn
An epidemic of errors in credit and loan agreements is the latest expensive scandal to hit the banking sector, with the cost already approaching £1bn. It affects some personal loans, credit and store cards, and hire purchase agreements. It has nothing to do with the payment protection insurance (PPI) scandal. Many of Britain's banks and building societies have discovered that some of the annual statements, arrears notices and other correspondence sent to customers did not comply with the Consumer Credit Act because they did not give all the information that people were entitled to by law. Under the law, borrowers are not liable for interest or default charges relating to a period when a lender has not provided the information, even if the original documentation was fully above board. One common error is that loan statements failed to include the original amount borrowed. The law requires such statements to contain the sum borrowed, plus the opening and closing balance. The problem first came to light in December 2012 when it emerged that 152,000 people who have, or had, a personal loan from Northern Rock would each receive a windfall averaging £1,775 because of a paperwork glitch. The taxpayer picked up the £270m bill because the error happened when Northern Rock was in public ownership. GUARDIAN

HSBC chairman warns against banking reforms
The chairman of HSBC, Douglas Flint, warned that fear of hefty fines was forcing banks to become risk averse as they grapple with unprecedented regulatory reforms in the wake of the financial crisis. Flint said there was an "observable and growing danger of disproportionate risk aversion". He made his remarks as the bank, which makes two-thirds of its profits in Asia, reported a 12% fall in first-half profits to $12.3bn and published 10 pages of warnings about the litigation and regulatory fines it could face on an array of matters ranging from the collapse of the Madoff empire to the fixing of prices in currencies and gold and silver. Some of these fines could be "significant", the bank added. Flint outlined a list of regulatory changes that the bank was facing, including implementing a ringfence between its retail banking and "casino" investment arms – demanded by UK regulators from 2019. Andrew Tyrie, the Conservative chair of the Treasury select committee, who chaired the parliamentary commission on banking standards that called for the "electrification" of the ringfence, to break banks up if they failed to comply with the rules, said: "We must ensure the momentum behind the crucial reforms both on ringfencing and on electrification is not lost. They are in any case half a decade away from completion.” GUARDIAN


SEPTEMBER 2014

Barclays hit by new £38m fine over client assets
Barclays is to be fined £38m for breaching City rules requiring clients’ funds to be kept separate from its own assets, in what is expected to be the largest fine for such an offence. The £38m fine is the second punishment Barclays has received for breaches of client asset rules. The penalty, imposed by the Financial Conduct Authority, will be the latest setback for the bank in its attempt to clean up its reputation in the wake of the 2012 Libor rigging scandal. While this time frame predates the appointment of Antony Jenkins as chief executive, the latest punishment comes as he attempts to defend the bank against fraud charges in the US in relation to the sale of mortgage bonds and after a £26m fine in May for fixing the gold price. GUARDIAN

An economy built on debt? Bank of England confirms high levels of mortgage debt made the recession worse
The UK's household debt to income ratio rose from around 100 per cent in 1999 to a peak of 160 per cent in 2008. Mortgage debt accounts for around 80 per cent of total household debt, and explains most of the increase in the debt to income ratio, the Bank said. The rapid rise in mortgage debt prior to the credit crunch had inflated household spending in general, boosting growth, but much of this was reversed when the crisis hit. The Bank said: 'In the second half of the 1990s, households with mortgage debt to income ratios greater than two appear to have increased the share of their income spent on non-housing consumption by more than mortgagors with lower debt to income ratios. But these higher debt mortgagors subsequently made larger-than-average reductions in spending relative to income after the financial crisis. In June, the Bank introduced measures to designed to prevent dangerously high levels of indebtedness. Mortgage lenders now have to be satisfied that borrowers would be able to meet repayments if the Bank Rate were to rise 3 percentage points. Lenders must also limit the proportion of mortgages of 4.5 times income and above to no more than 15 per cent of new loans. These measures could be tightened further if the Bank becomes more worried about household debt. DAILY MAIL

The great Isa rip-off: Prudent savers moving from shares to cash earn pitiful interest and are hit with sky-high fees
Britain’s biggest investment names are behind an Isa rip-off that penalises customers who want to protect their nest eggs by moving them into cash. These careful investors are being offered derisory - or no - interest on their savings, forced to pay fees for cashing in their investment and face sky-high charges to move to another company. At best they get 0.1 per cent - or £5 interest a year on £5,000. On a bog standard easy-access cash Isa on the High Street, you can get more than 15 times extra - earning £77.50. It’s time for big names, which include the banks Barclays and Halifax, broker Hargreaves Lansdown and investment giant Fidelity to do better by their customers. These rip-offs are against the spirit of new Isa rules introduced in July, which allow everyone to save up to £15,000 a year tax-free. The creation of the Super Isa was one of the flagship policies unveiled by Chancellor George Osborne in his last Budget. He also changed the rules so savers could move easily between cash and shares. But the dream that this would become a flexible and simple incentive for people to save is being hampered by the fees and rates being offered. Since they were launched 15 years ago, Isas have become wildly popular - more than 24million people hold money in cash or shares. DAILY MAIL

Banks to reopen 2.5m PPI claims after FCA inquiry
Banks and card companies will reopen 2.5 million PPI mis-selling complaints amid claims of underpayment and rejection of compensation. The Financial Conduct Authority (FCA) said that firms would look again at cases in 2012 and 2013 where claimants could have been treated unfairly. One expert, commissioned by the BBC, estimated that underpayments could have hit £1bn. The 2.5 million cases are now being reopened because the FCA noticed a sudden dip in the number of complaints being upheld and leading to compensation. Payment protection insurance (PPI) was designed to cover repayments, in the event of redundancy or ill-health, but was widely mis-sold. A huge programme of compensation was set up, with financial firms now having handled more than 13 million complaints since 2007. The latest figures show that £390m was paid out in compensation in June, taking the total amount of redress in three years to £16bn. Seven out of 10 claims of mis-selling of PPI have been upheld in the customer's favour. About 3.2 million letters have been sent to people believed to have been mis-sold PPI but who have not submitted a compensation claim, with another two million still to be sent out. BBC NEWS


OCTOBER 2014

“Outrageous conduct”: City facing more than ‘a few bad apples’, says Bank of England deputy governor
Minouche Shafik, the deputy governor for markets and banking, said the industry urgently needed to come forward with its own proposals to reform a system recently tarnished by allegations of the rigging of foreign exchange trading. She warned that bad practices in markets may be re-emerging as memories of prior scandals fade. She said much had been done to strengthen the financial system, but some of the benefits were “offset by a long tail of outrageous conduct cases. These are like salt rubbed into the wounds to public confidence in financial markets.” Ms Shafik is overseeing the UK Fair and Effective Markets Review, launched by chancellor George Osborne over the summer after allegations that traders had rigged interest-rate and currency benchmarks. The scandals have damaged Britain’s reputation as a key global financial capital. A consultation paper by the Bank, Treasury and Financial Conduct Authority, launched on Monday, raises the prospect of tougher penalties on staff who breach internal guidelines, more intrusive electronic surveillance of trading floors and more established procedures for protecting whistleblowers. But it also considers harsher regulation including imposing higher capital charges on firms that fall foul of rules. It also floats the idea of extending the UK’s bonus clawback rules from banks to non-banks such as asset managers and trading firms. The review said regulators should have the power to police seven key financial benchmarks, including those governing oil, precious metals and foreign exchange. In the paper, the review asked whether there was a need to strengthen criminal sanctions in fixed interest, currency and commodity (FICC) markets, as well as to introduce punishments such as temporarily suspending firms’ or individuals’ permissions to trade in certain markets. FINANCIAL TIMES

We'll sue if you flout crackdown on bankers’ bonuses, EU tells Bank of England
The European Banking Authority’s most senior executive, Adam Farkas, raised the prospect of court action after the Deputy Governor of the Bank of England described the European Union’s bonus cap as ‘the wrong policy’. All of Britain’s leading banks have attempted to sidestep the European rules by offering senior staff extra payments, called either allowances or ‘role-based’ payments. Now the decision of the EBA on Wednesday has effectively ruled that these are bonuses under another name. The European Union passed a directive earlier this year requiring banks to cap bonuses at 100 per cent of a banker’s salary or 200 per cent if they can get prior approval from shareholders. Chancellor George Osborne opposed the directive from the start and is challenging the law in the European Courts. All the major UK banks are now paying their staff allowances. HSBC boss Stuart Gulliver gets £1.7 million a year in shares quarterly, on top of his pay and annual bonus. Barclays calls its allowances ‘role-based pay’ and is handing £950,000 in this form to boss Antony Jenkins this year. Barclays executives get this quarterly in shares. More junior staff receive cash sums monthly. Lloyds boss Antonio Horta-Osorio was awarded a fixed allowance of £900,000 for 2014, which he will receive in share awards over the next five years. RBS’s chief executive Ross McEwan is the only major bank boss to not receive an allowance this year – but his bank will still pay other executives and dozens of other senior bankers in the new format. The British Bankers’ Association estimates that 35,000 of Europe’s bankers will be affected by the bonus cap, two-thirds of them in the UK. DAILY MAIL

Bank of England tells bankers to get used to lower pay
Bank of England deputy governor Jon Cunliffe said banker pay had failed to adjust sufficiently since the crisis. "It is unlikely that we will see, or want to see again, the returns on equity that we saw before the crisis. In the new world, paybills may well have further to adjust," he said. Mr Cunliffe said banking staff had been receiving "a larger share of a smaller pie" relative to shareholders. At global banks, profits attributable to shareholders averaged 60% of the pay bill in 2007, but by 2013 this had fallen to around 25% of the pay bill, he said. It is important, he said, that in seeking to restore returns, "banks and investors do not think in terms of 'back to the future'". BBC NEWS

Banks face paying out billions to more than 12million customers after landmark legal battle against Lloyds over 'unfair' £750 fine for customer who was just £2.67 overdrawn
Oliver Foster-Burnell from Taunton, Somerset, went a few pounds over his £500 limit with Lloyds while he was in between jobs in 2008. Within weeks, the 28-year-old received a letter saying for that every day since he had been charged £20 by the bank. The fees spiralled to £750 before Mr Foster-Burnell was able to find a way out of his financial mess. But, after settling his debts, he took his case to county court where a judge ordered the bank to pay back the fees with interest. His victory could pave the way for billions to be returned to customers in similar situations if Mr Foster-Burnell is able to convince a High Court Judge that his case could apply to others. If successful, banks could face returning as much as £30billion to 12.6million customers, according to a study by The Office of Fair Trading. DAILY MAIL

Lloyds sacks eight traders over Libor and other rate rigging scandal, and claws back £3million in bonuses in the process
Lloyds dismissed the traders over attempts to rig the Libor interest rate and another rate used to calculate what the bank paid to use a government scheme designed to help save it from collapse during the depths of the banking crisis. Sources familiar with the situation said that the laws on recouping bonuses made it impossible to claw back payouts, worth millions more, that have already been pocketed. But the sacked bankers could face further financial penalties, bans from working in the City, or even criminal prosecution, amid ongoing probes by the Serious Fraud Office and City regulator the Financial Conduct Authority. Lloyds was initially investigating some 22 staff, four of whom have since returned to work after being exonerated by an internal probe. A further 10 have escaped without any punishment because they left the bank before it could claw back any bonuses or other payouts for misconduct. The bank was slapped with fines adding up to £218million by US and UK regulators earlier this year, after dealers tried to manipulate the Libor inter-bank lending rate and the Sterling repo rate. Chief executive Antonio Horta-Osorio sought to draw a line under wrongdoing at Lloyds, in the light of what he called ‘totally unacceptable behaviour’. The FCA is understood to be considering further action against the Lloyds staff, which could include bans from working in the City or fines worth hundreds of thousands of pounds. And the Serious Fraud Office, which has brought criminal charges against 12 people in connection with rigging Libor, is thought to be considering further prosecutions. Banking analysts still expect billions of pounds in new fines, with Barclays, RBS and HSBC expected to join a settlement of up to £1.8billion with six firms accused of foreign exchange manipulation. Analysts at Bank of America said Barclays, RBS and HSBC were facing £14billion in future fines, when including issues such as RBS’ role in the sale of US mortgage-backed securities widely seen as a key trigger for the global financial meltdown of 2008. DAILY MAIL

Top fund manager Neil Woodford says his industry overcharges
One of the country's most successful fund managers has criticised his industry for charging customers too much, and paying its managers too much. Neil Woodford says fund managers often claim to be actively managing a fund, when in reality they are following the herd. This means fund managers don't actively choose which stocks to invest in, but instead tend to follow a big index such as the FTSE 100. However, he says that wiser customers and stricter regulation will lead to lower fees in the future. Mr Woodford set up his own fund in May and has £7bn under management. Neil Woodford is considered in the industry as one of the country's best performing fund managers. He puts that down to always taking a long-term view on his investments, arguing that most fund managers take a far too short-term approach. "Fund managers are constrained by the fear that if they were to underperform the index for a three, six or 12 month period, their careers would be in jeopardy," he said. As a result, Mr Woodford argues, they are reluctant to buck the trend or invest in start-ups. BBC NEWS

Banking regulator FCA may fine banks £2bn for currency-rigging
The City regulator has this week held secret talks with some of the world's biggest banks about a settlement for the manipulation of global foreign exchange markets that could cost the lenders a total of around £2bn in fines. The banks, which also include Barclays, HSBC, Royal Bank of Scotland, Citi, JP Morgan and UBS, would pay different sums, depending on the gravity of their traders' alleged efforts to artificially move foreign currency rates. However, a person close to the talks said the FCA had informed some of the banks' lawyers that the smallest of the penalties imposed for foreign exchange-rigging were likely easily to outstrip the biggest of the fines it has so far handed out for manipulation of the interbank borrowing rate Libor. Such an outcome would chime with a warning from Martin Wheatley, the FCA chief executive, in February, when he told MPs that allegations about collusion to rig prices in the $5.3tn (£3.25tn) spot market were "every bit as bad as they have been with Libor". The largest fine dished out by the FCA for Libor-rigging to date was £160m paid by UBS in December 2012. SKY NEWS

Bank of England deputy asks US to fine banks less
The deputy governor of the Bank of England, Andrew Bailey, said: “I am trying to build capital in firms and it’s draining out the other side (in fines and penalties).” Bailey has called for better co-operation with US regulators over the scale of fines being levied on banks to ensure they do not weaken their financial position. Regulators in the US levy largr penalties than their UK counterparts, which on Tuesday fined Barclays £38m for failing to keep its clients’ money separate from the bank’s own assets – a record for that offence. When Barclays was fined £290m for rigging Libor in 2012, just £87.5m was levied by the UK regulator. Since then, HSBC has been fined £1.2bn for breaching money laundering rules in the US while French bank BNP Paribas has been fined £5bn for dealing with countries that were subject to sanctions. GUARDIAN


NOVEMBER 2014

Pensions hoodwink: New rules to help workers save for retirement will leave them worse off than they are told - by up to £90,500
Employees are being hoodwinked over the amount of money going into their workplace pensions because of the way the contributions are calculated – and as a result will retire on smaller sums than they expect. Under auto-enrolment, the flagship scheme launched two years ago by the Government to encourage nine million workers into saving for retirement for the first time, employees are routinely told that contributions worth 8 per cent of their annual pay will eventually be diverted into their savings pot. But what many savers fail to realise is that contributions are typically worked out on a specific band of their earnings, not their full pay. Chief executive of NOW Pensions, Morten Nilsson, says: ‘The 8 per cent contribution rate is regularly quoted but the reality is nobody will actually get a full 8 per cent – the most anyone gets is 6.9 per cent if they are exactly at the top of the earnings band, with somebody earning £10,000 only receiving a total contribution of 3.4 per cent, which is woefully inadequate.’ This method of calculation means an average earner on £27,000 a year will lose out on the benefit of up to £90,500 in pension contributions by the time they retire. DAILY MAIL

Credit card firms probed on fears they profit from keeping borrowers in debt and offering them credit they don't want
A probe into whether credit cards are being sold in a way which exploits people’s tendencies to take on too much debt is to be launched by the City regulator, the Financial Conduct Authority (FCA). A key concern of the FCA is that companies make excess profit from those who over-borrow and under-repay - meaning they remain in a level of debt that creates interest and other fees for the lender, but without making the repayments to clear the debt. Credit card firms must require borrowers make minimum repayments, but these are only set at a level to cover the interest and fees, plus 1 per cent of the balance. Repaying any debt at this rate would take more than eight years. A worry is that card firms target more of these customers so they can subsidise others for whom using a credit card is free because they repay borrowing in full each month. Another area of interest will be how credit cards are sold, and whether firms are made to compete on price. The FCA is concerned that even those who compare cards through price comparison websites do not really know the fees and interest rates charged because this is only confirmed once they have been accepted and offered the card, and is often different from the headline rate. Additionally, customers may search for a credit card for one purpose, for example to transfer an existing balance, but then be offered a card that could lead them into more debt. For example, if it included and period of interest-free purchases. The practice of offering a higher credit limit unsolicited to borrowers will also be looked at. The regulator said: 'We will look at whether credit cards are marketed and sold in a way that exploits or exacerbates consumer behavioural tendencies with respect to over-borrowing.' DAILY MAIL

Forcing small businesses out of business: RBS apologises for 'incorrect' evidence to MPs
RBS was facing allegations that its global restructuring group (GRG) forced customers out of business so it could buy their assets and make a profit. Giving evidence in June to the Treasury Committee, senior directors Derek Sach and Chris Sullivan denied it was run as a profit centre. However, in a July letter, Mr Sullivan admitted it was run in this way. In a letter to Andrew Tyrie MP (the treasury Committee chairman), written in August but released yesterday, RBS chairman Sir Philip Hampton wrote: "This lack of clarity on a very important point is very disappointing to the committee, as it is to me, and I apologise for it." The apology caps a difficult few days for RBS. On Friday, it said it had miscalculated the results of a stress test by the European Banking Authority. A day earlier, RBS was fined £56m for a 2012 IT failure. TELEGRAPH

RBS faces new row over share bonanza for ex-chief Hester
The Mail on Sunday reveals today that Stephen Hester was handed £1 million in RBS shares in March this year as part of a long-term incentive plan, but RBS will also consider offering him almost £2 million worth of shares early in the new year. Hester was entitled to the three potential pay-outs under a long-term incentive plan agreed when he left in June of last year. The second will have to be decided early in 2015 and could be worth a further £1.9 million. A third payment could also come in 2016 worth another £800,000 at today’s share price. The bank is set to reduce its investment bank’s bonus pool as a result of the foreign exchange rigging, and it will release an accountability review later this year detailing what action it is taking on traders responsible. But politicians are likely to demand the clawbacks go all the way to the top. A report on the rigging scandal, compiled by City watchdog the Financial Conduct Authority, slammed RBS’s management for its failure to police its traders and stop them from manipulating foreign exchange rates. The regulator’s settlement with the bank – which is 79 per cent owned by the Government – covered failings from 2008 until October 2013. Hester joined in November 2008 and left in June 2013. DAILY MAIL

HSBC's private banking arm accused of tax fraud by Belgium
Belgian prosecutors allege that hundreds of clients - including diamond dealers in Antwerp - moved money to offshore tax havens with the help of the bank. They said it resulted in hundreds of millions of euros in lost tax revenue. In August, HSBC warned that the penalties in relation to such allegations "could be significant". In a statement, Belgian authorities accused HSBC of "having knowingly eased and promoted fiscal fraud by making offshore companies available to certain privileged clients". These companies, which are based in Panama and the Virgin Islands, exist for the sole purpose of tax evasion, they added. Over 1,000 taxpayers are alleged to have been involved in the fraud, which saw funds amounting to several billion dollars transferred out of Belgium since 2003. In October, Belgian police raided the homes of approximately 20 people with private bank accounts at HSBC's Swiss subsidiary, to gather evidence against the lender. Banks operating in Switzerland are bound by the European Union Savings Directive to counter cross-border tax evasion, by collecting information on the savings income foreign residents receive outside their resident state. BBC NEWS

Six banks fined £2.6bn by regulators over manipulation of foreign exchange rates
HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase, Citibank and Bank of America have all been fined. A separate probe into Barclays is continuing. The fines were issued by the UK's Financial Conduct Authority (FCA) and two US regulators. FCA boss Martin Wheatley told the BBC: "This isn't the end of the story... The individuals themselves will face the consequences." Several senior traders at the banks have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme. The fines follow a 13-month investigation by regulators into claims that the foreign exchange market - in which banks and other financial firms buy and sell currencies between one another - was being rigged. The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets. About 40% of the world's dealing is estimated to go through trading rooms in London. The FCA said the "tight knit groups" formed by traders at the different banks had described themselves as "the 3 musketeers", "the A-team" and "1 team, 1 dream". However, Professor Mark Taylor, a former foreign exchange trader and now dean at Warwick Business School, said the fines were "relatively small beer for banks that regularly report billions of dollars in annual profit... The interesting thing is that there are no individuals named as yet, and no individual prosecutions. This is still a possibility and it will be interesting to see how that pans out. At the moment, it's really only the shareholders - which in the case of RBS means British taxpayers - who suffer from these fines." BBC NEWS

An end to bank bailouts? 'Too big to fail' bank rules unveiled by global regulators
The rules, created by the Financial Stability Board (FSB), a global regulator, will require big banks to hold much more money against losses. Mark Carney, FSB chairman and governor of the Bank of England, said the plans were a "watershed" moment. He said it had been "totally unfair" for taxpayers to bail out banks after the financial crisis of 2008 and 2009. "The banks and their shareholders and their creditors got the benefit when things went well. But when they went wrong the British public and subsequent generations picked up the bill - and that's going to end," he told the BBC. Mr Carney explained that the new system would ensure that bank shareholders, and lenders to banks such as bondholders, would become first in line to bear the brunt of future losses if banks could not pay out of their own resources. The proposed new rules, which are up for consultation and should take effect in 2019, require "global systemically important banks" to hold a minimum amount of cash to ensure they will be able to survive big losses without turning to governments for help. The capital set aside should be worth 15-20% of the bank's assets, the FSB said. That is a far bigger cushion against losses than is required by current banking rules. BBC NEWS

Royal Bank of Scotland sets aside £400m for forex-rigging fines
Further evidence that banks are bracing for stiff penalties for rigging currency markets emerged on Friday after Royal Bank of Scotland set aside £400m to cover the cost of the investigation into the £3.5tn-a-day market. There are expectations that HSBC will incur a similar charge, which would come on top of moves by Barclays, US banks Citigroup and JP Morgan and Swiss bank UBS to put hundreds of millions of pounds aside to cover penalties from regulators in the US and Britain. The decision to allocate funds indicates the banks’ belief that the penalties could be imposed soon, with the UK’s Financial Conduct Authority and its US counterparts expected to announce a coordinated settlement with up to six banks next month. RBS, which is 81% owned by the taxpayer, also added £100m to its provisions to cover the cost of mis-selling payment protection insurance. It follows responses by other high-street banks to increased applications for compensation in the costliest mis-selling scandal in history. Another £180m was earmarked by RBS for other penalties including the IT meltdown in 2012, which left customers locked out of their accounts, including those at Ulster Bank who were affected for more than three weeks. GUARDIAN


DECEMBER 2014

Forex manipulation: First banker arrested in $5.3 trillion fraud investigation
A London banker is believed to be the first person arrested in relation to the criminal investigation into rigging the $5.3 trillion a day foreign exchange market. The Serious Fraud Office confirmed that a man was arrested in Billericay, Essex, on Friday. No other details about the arrest were given. The SFO opened an investigation into foreign exchange manipulation in July, and last month six banks were fined £2.7bn related to currency rigging. Dozens of bankers have been suspended or fired in relation to forex manipulation, but this is believed to be the first arrest. Chat logs published by the Financial Conduct Authority last month showed how traders at Royal Bank of Scotland, HSBC, Citibank, UBS and JP Morgan, using nicknames such as “the A-team”, collaborated to rip off clients. After the fines, George Osborne wrote to the SFO saying it would be given a blank cheque to investigate wrongdoing. In the other major rigging scandal, Libor manipulation, one criminal conviction and 13 charges have been made. TELEGRAPH

Expelled ‘Love Activists’ RBS squatters succeed in offering Christmas lunch to London homeless
A group of squatters, known as the “Love Activists”, have provided an uncooked Christmas lunch to homeless Londoners on the pavement outside a former RBS bank they had been occupying, after they were evicted from the premises on Christmas Eve morning. They have vowed to continue their protests. The group of 20 activists occupied the imposing grade ll listed building on the corner of Charing Cross Road and the Strand that previously housed an RBS bank, in the early hours of Saturday morning, saying they found an open fire escape door. All say they are homeless and occupied the building to raise awareness about the epidemic of homelessness in London especially amongst young people. There were 6,437 people sleeping rough in London last year, an increase of 8% on the figure two years previously. Many of those, like the Love Activist team, are young people. The prime site building is owned by Greencap Ltd, a company registered in Jersey and which, according to the accounts it filed earlier this year, is valued at just £9. Until June 2013 it was leased to RBS. Greencap had obtained an emergency, no-notice injunction to remove them from the premises. GUARDIAN

British household debt is £1.7 trillion: we are living further beyond our means than at almost any time in the last 20 years.
The head of the Office for Budget Responsibility (OBR), Robert Chote, told a panel of MPs that consumers have been upping their spending, which in turn helps improve the growth of the economy. But the increased expenditure does not mean that households have more cash to spare – they are just using their savings. He added: ‘We have assumed that it is not plausible [that this could continue].’ Consumer spending grew by 2.1 per cent in the first nine months of this year, even though wages continued to stagnate, figures from the OBR show. The economists estimate that the huge gap between earning and spending is the second largest since the mid-1990s. Total household debt stood at £1,670billion as of the second quarter of this year. The OBR has increased its forecast of unsecured household debt as households continue to spend beyond their means. The forecasts come as debt experts warned that as many as one in four credit card customers are paying the minimum every month or struggling to pay at all. One in five respondents with a credit card said they only made the minimum payment in October, while a further one in 20 said they made no payment or paid off less than the minimum. DAILY MAIL

Have you checked your pension recently? Officials reveal companies are charging some savers FOUR TIMES the recommended cost to manage their pot
Some pension companies take more than 3 per cent of savers' money each year as a fee, potentially reducing retirement incomes by tens of thousands of pounds. The charges compare to the capped 0.75 per cent fee that applies to schemes taking in new members under the Government's automatic enrolment policy. The audit of pension charges was made by the Independent Project Board, which was set up after the Office of Fair Trading found evidence in 2013 that savers were not getting value for money from their pensions. The report found that of £67.5billion held in relevant schemes as much as £25.8billion is potentially subject to charges above 1 per cent, accounting for 1.5million savers. Around half of this is could be exposed to charges above 1.5 per cent, between £5.6bn and £8.0bn is exposed to charges above 2 per cent and around £0.9bn exposed to charges above 3 per cent. The report found 38 different types of charge being levelled by schemes, and 291 different combinations of these charges being applied. Some schemes impose penalties as high as 10 per cent of the fund's value if savers want to switch to a better scheme. Others apply monthly cash fees on top of annual percentage ones. This not only takes more money from savers, it can distort the charges so that a scheme with a lower annual charge can work out more expensive than one with a higher fee - depending on how much the saver contributes. The report related to 'defined contribution' pension schemes, which take money from workers and their employer and invest it in order to build a retirement fund. It did not include final salary plans, which are part of defined benefit schemes that guarantee workers a set income in retirement, with firms taking responsibility for this. Tom McPhail, head of pensions research at Hargreaves Lansdown, said: 'Long-standing loyal investors shouldn’t be penalised by getting a worse deal than new customers. This audit has revealed that billions of pounds of investors’ life savings are still languishing in poor value products, and worse still, 407,000 have joined poor value schemes in the last 3 years”. DAILY MAIL

Whitewash: rip-off pension providers will not be named and shamed
The results of an 18-month review by the UK’s competition watchdog into rip-off pension charges will not name and shame the worst offenders, leaving consumers in the dark about whether their scheme provides value for money. The Competition and Markets Authority (CMA) set up an ‘independent project board’ (IPB) to review pension charges following a report from its predecessor the Office of Fair Trading that revealed £30 billion of savings in pre-2001 defined contribution (DC) workplace pensions may be at risk of high charges and failing to provide value for money. The report goes against the general push towards greater transparency and lower charges in pensions. From April a 0.75% cap will be placed on pension charges so that those being auto-enrolled into a pension scheme will not have to pay extortionate charges. The cap will mean a saver with a pension pot of £30,000 will pay £225 a year for their pension scheme, compared to the £450 they would pay on a scheme that charges 1.5% - previously a typical levy for a pension. Campaign group ShareAction said the review appeared to be 'a stitch-up for savers'. ‘As we always predicted, this so-called inquiry looks like an effort to protect insurers who have exploited innocent savers over a long period, gouging out fees on more than £30 billion in poor-value schemes,' said Catherine Howarth, ShareAction chief executive. ‘This inquiry has no plan for further review or action and we fear it will simply be kicked into the long grass. But the fate of this inquiry deserves scrutiny from parliamentarians, and we will be speaking with MPs over the coming days to ensure that questions are raised in parliament. CITYWIRE

Lloyds promises to ditch sales targets in bid to snuff out mis-selling and overhaul the bank's tarnished image
Head of Retail, Alison Brittain, described it as a ‘step change’ for the state-backed lender, which has racked up an £11.3bn bill for mis-selling payment protection insurance and was fined £28m last December for its high pressure sales culture. Lloyds were notorious for giving its most prolific salesmen bottles of champagne and ‘grand in the hand’ bonuses. Describing ditching sales targets as an ‘overwhelming symbol of a different way of thinking and running a business’, she said: ‘We’ve managed all the risk out. We knew we were running a clean bank, but this last symbolic gesture says to everybody who works all the way through the line that it’s just about the quality of the conversation you have with the customer, not about sales.’ But the new regime will still open up Lloyds to criticism as it will impose strict targets on salesmen to meet a certain number of customers. A senior personal banking adviser, who asked not to be named, said: ‘The directors always paint a false picture to cover their own backs. Any person knows the sales culture at Lloyds is appalling. Earlier this year the bank increased sales targets and last year the FCA fined Lloyds for mis-selling protection policies.’ The High Street giant said that it will introduce its ‘radical’ new regime at 2,249 Lloyds, Halifax and Bank of Scotland branches from January 1. DAILY MAIL


JANUARY 2015

New banking shame: two million credit card holders to get up to £270 compensation for paying for 'security' policy they already got for free
Security products were sold to customers of 11 high street banks, including Barclays, HSBC, Lloyds, Santander and The Royal Bank of Scotland, according to the Financial Conduct Authority. Issued by Affinion International Limited but sold under names including 'Card Protection', 'Sentinel', 'Sentinel Protection' and 'Safe and Secure Plus', the policies were marketed as offering protection if the card was lost or stolen.  However, the bank or issuer usually offers – free of charge when you take out the card - cover for everything over £50 if transactions take place before the card is reported missing, so for many the product would be redundant. The policies cost £25 per annum and have been on sale since 2005. Therefore if someone had paid out for ten years, compensation could be as high as £250 plus eight per cent interest – around £270. Card holders who could be eligible for compensation will receive letters in the next few days about a voluntary redress scheme and must vote in favour in April or May for it to go ahead. If a majority of customers agree, then the scheme must be approved by the High Court and compensation will be paid out later this year. There has been no formal investigation by the FCA, nor any finding of wrong-doing. The announcement from the Financial Conduct Authority comes after a similar, but much wider-reaching, compensation scheme saw seven million banking customers share a pot of £1.3billion after they were missold card protection insurance by CPP. DAILY MAIL

Since September 2012 unsecured consumer debt has been rising almost every month 
The Bank of England said over the course of three months unsecured lending had grown at its most rapid pace since October 2005, and in November was up 6.9% compared with November 2013. The figures show that at £168bn – more than £5,800 per household – the total outstanding unsecured debt remains some way below the peak reached in September 2008 when UK consumers collectively owed £208bn alongside their mortgages. However, there has been a marked change in behaviour as the economy has recovered: in nearly every month for the four years to September 2012 consumers paid off more than they borrowed, with banks reining in credit limits and restricting loans and overdrafts, but since then the trend has reversed with almost every month seeing increased borrowing. Measuring monthly, Britons ran up their highest level of new debt in November for nearly seven years, with the month’s borrowing on credit cards, loans and overdrafts hitting more than £1.25bn. More than £980m was taken out in loans and overdrafts during the month, sharply up from the monthly average of £728m over the previous six months. Credit card lending fell to £269m, from £399m in October, but remained above the average for the previous six months. Banks and credit card companies have been jostling for business with offers to attract new customers: loan rates have plummeted while balance transfer deals on credit cards have become increasingly generous. The chief executive of the debt charity StepChange, Mike O’Connor, said the figures “point to a worrying rise in people’s reliance on credit”. He added: “The economy is growing and there is some wage growth but it is very marginal and millions are living on a financial precipice leaving them vulnerable to financial shocks and strains.” GUARDIAN

Lloyds braced for rage over boss' windfall: Horta-Osorio's £7m pay 'sticks in the throat'
The Portuguese chief executive is set to receive the shares bonanza in the coming weeks, placing the state-backed lender under intense scrutiny ahead of the General Election. Last night campaigners said the huge award would ‘stick in the throat’ for ordinary taxpayers while Labour reiterated its pledge to reintroduce its tax on bankers’ bonuses if it wins power in May. Lord Thurso, Liberal Democrat member of the Treasury Select Committee, perhaps spoke for many when he questioned why bankers’ pay is still so out of kilter with the rest of society. He said: ‘I fail to see why any banker is worth more than the Prime Minister, a top brain surgeon, or the chief of the defence staff running operations in Afghanistan or Iraq... Bankers are paid huge amounts to use other people’s money to make money for themselves.’ Horta-Osorio’s huge pay-out – which is almost 50 times David Cameron’s £142,500 annual salary – stems from a performance-related long term bonus awarded three years ago. Andy Silvester, campaign director at The Taxpayers’ Alliance urged the Government to take a ‘more active role’ in curbing pay at the lender. He said: ‘It will stick in the throat that the boss of a bank which has had many of its fines paid by taxpayers is walking off with a sizeable bonus.’ Mark Garnier, a Conservative member of the Treasury Select Committee, said the award for Horta-Osorio is ‘hard to justify’ despite putting Lloyds on a ‘more stable footing’. He added: ‘I am an enthusiast for free markets but even I am finding it hard to justify these enormous bonuses for people who take no risk with their own money but have everything to gain.’ DAILY MAIL

Banks will be paying out on PPI 'for years to come' as 4,000 complaints pour into ombudsman every WEEK
The Financial Ombudsman Service said it still receives more than 4,000 PPI complaints every week, bringing the total number of cases received over the last few years to roughly 1.25million. In 2012, at the height of the PPI mis-selling scandal, the FOS was seeing 12,000 new cases reaching their desks each week. In recent months, around 55 per cent of PPI-related complaints have been upheld in consumers' favour, the FOS added. In recent years, the FOS has taken on over 2,000 new staff to deal with increasing numbers of disputes between financial companies and their customers. Over 87 per cent of the work currently undertaken by the FOS relates to PPI cases. Last year, the Financial Conduct Authority announced that the banking industry had paid out approximately £16billion in three years of the £22billion they had set aside to deal with the consumer scandal. DAILY MAIL


FEBRUARY 2015

HSBC: Swiss prosecutors search bank as money-laundering inquiry is launched
Pressure on HSBC has mounted after prosecutors in Switzerland raided the offices of the bank’s Geneva operations following revelations that it helped wealthy customers avoid taxes. The search was being led by the prosecutor-general, Olivier Jornot, and comes after the Belgian and French authorities began to scrutinise the tax affairs of Europe’s biggest bank. The UK is not embarking on a criminal investigation and has faced criticism for prosecuting just one out of the 1,000 individuals whose details were contained in the cache of documents obtained by Hervé Falciani, a former employee of the bank. Those files were the basis of last week’s reports by the Guardian and a collaboration of news outlets around the world about the scale of the tax avoidance operation being run by the bank’s Swiss subsidiary. Swiss prosecutors said the investigation followed those revelations, which showed how HSBC’s Swiss arm allowed clients to withdraw “bricks” of cash and helped clients conceal their accounts from domestic tax authorities. The prosecutors in Switzerland said they were investigating suspected aggravated money laundering and currently focusing on the bank - HSBC Private Bank (Suisse) - although this could be extended to people suspected of committing or participating in money laundering. A petition calling for the UK to investigate the affair is two-thirds of the way to towards its target of attracting 1m signatures. GUARDIAN

HSBC arm 'helped clients evade taxes' as thousands of clients including celebrities and sports stars hold secret Swiss accounts
The Swiss arm of HSBC, Britain's biggest bank helped wealthy clients such as sports stars, celebrities and politicians evade huge amounts of tax, according to an investigation by journalists. The Guardian newspaper and the BBC's Panorama programme analysed details of 30,000 thousand accounts holding nearly £78billion worth of assets and say they found evidence of secret Swiss accounts being used to help clients deliberately conceal assets from tax authorities. Holding a secret bank account is not itself illegal, using such accounts to deliberately conceal assets in order to evade tax is against the law. The leaked documents have already prompted a series of criminal probes in several counties. In the UK, HM Revenue & Customs, which received the data in 2010, has clawed back £135million from over 3,600 Britons. But it has faced complaints from MPs over the pace of progress and the fact that only one evader has been prosecuted. DAILY MAIL


MARCH 2015

RBS paid out £421m in bonuses in 2014 despite £3.5bn loss
Royal Bank of Scotland has revealed it handed out £421m in bonuses in 2014 as it reported its seventh consecutive year of losses. RBS said it would reduce its operations to 13 countries, compared with 38 at the end of last year and 51 in 2009, just after it was bailed out. The move is intended to focus the bank on the UK. Losses have reached £43bn since the 2008 bailout. There were also provisions of £2.2bn, including for foreign exchange rigging and another £400m hit for compensating customers mis-sold payment protection insurance. In an attempt to defuse any row over bankers’ pay in the runup to the general election, chief executive Ross McEwan will not receive a £1m payout intended to prop up his pay as a result of the EU bonus cap, which limits bonuses to one times salaries. The £421m total bonus payout at RBS in 2014 follows the £588m paid out last year. McEwan insisted that such payments were necessary despite another year of losses. He said he did not want his own pay to become a distraction and said he needed to be able to motivate staff to turn around the business. The chancellor, George Osborne, also attempted to keep the focus on pay at the bailed-out bank, writing to the chairman to urge him to keep RBS as a “back marker” on pay. “In the context of RBS’s conduct fines in 2014, it is right that the bonus pool is down again. I would also expect that, as in the past, no executive directors or members of the executive committee will receive bonuses, despite improved profitability,” said Osborne’s letter. GUARDIAN

Lloyds Bank blasted for handing boss whopping £11.5m payout after massive taxpayers bailout
The bumper package for chief executive Antonio Horta-Osorio included a delayed £7.4million share bonus promised to him in 2012. It came as Lloyds, who are 24 per cent owned by the taxpayer, announced profits jumped fourfold to £1.8billion last year. Horta-Osorio – who pocketed a salary of more than £1million a year – also got a £900,000 “fixed share award”, £800,000 annual bonus, £578,000 pension plus other perks. His total pot is 319 times the average salary for a Lloyds’ worker. David Hillman, of the Robin Hood Tax campaign, said: “It’s good news that Lloyds are returning to rude health but that is tarnished by a part state-owned bank paying their chief executive such lottery-sized awards.” Labour’s Shadow Treasury Secretary Cathy Jamieson added: “People will be taken aback by the huge scale of these bonuses.” Lloyds, rescued by a £20billion bailout in 2008, dished out a total bonus pot of £369.5million for last year, down 3.6 per cent on 2013. DAILY RECORD

Barclays posts 'messy' full-year loss as shares fall, boss gets £5.5m
U.K bank Barclays posted a loss in its statutory full-year earnings on Tuesday as it set aside more money for potential fines related to its foreign exchange operations. Adjusted pre-tax profit increased by 12 percent in 2014 to £5.5 billion ($8.46 billion), compared to the year before, beating estimates of £5.3 billion in a Reuters poll. Adjusted net profit stood at of £2.8 billion for the year, up 27 percent. However, the bank recorded a statutory net loss of £174 million which includes all the one-off costs incurred, compared to a profit of £540 million in 2013. A provision of £1.25 billion was put aside for "ongoing investigations" and potential litigation relating to its foreign exchange operations, Barclays said. This included an additional £750 million put aside in the last quarter of 2014 which weighed on its earnings for that period. Many other lenders have settled or resolved similar issues, but an ongoing probe by a New York banking regulator means that Barclays has yet to fully realize any potential fines. "We remain focused on addressing outstanding conduct issues," CEO Antony Jenkins said in the report on Tuesday. "I regard the behavior at the center of these investigations as wholly incompatible with our values, and I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business." Shares were down by over 2 percent as markets opened in Europe on Tuesday morning. The bank's bonus pool was reduced by 47 percent, the bank said in its earnings - an average reduction of 17 percent per employee. After turning down his bonus last year, Jenkins was awarded £1.1 million for this 2014, bringing his total pay to £5.5m. Its dividend for shareholders was kept at 6.5 pence per share for 2014.CNBC NEWS

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