The Twitter #Finance100

Economia and Peerindex have drawn up a list of those who have the most sway in the financial world, and are picked up and followed by key Twitter users.

Their online influence is measured with a score of between 0 and 100 to gauge their authority across social media.

Headed by Nouriel Roubini, the respected American economist, the top accounts are those whose messages are retweeted, shared, responded to or argued with the most.

These tweeps will keep changing in the listing as they gain or fall in significance. Follow using the hashtag #Finance100.

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Financial Power List 2011

My thanks to Accountancy Age for placing me (at 42) on their Financial Power List for 2011. I also appeared in the list in 2006.

The list identifies the top 50 who will wield the most influence over the future direction of accounting.

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A Straw In The Wind

Britain's truly lousy banking system (appalling service, arrogant treatment of customers, extortionate charges etc) has been ridiculed and criticised for years, without any apparent effect on its performance or attitude.

The only way that the hapless and long suffering customers will ever see an improvement, is for a new "customer focused" competitor to enter the market and shake things up.

The BBC note that straws in the wind, in the form of Project New Bank and others, may be about to start the ball rolling:

"Project New Bank, is reported to be preparing to bid for 600 branches which Lloyds is being forced to sell off as the price for accepting tax-payer aid during the 2008 banking crisis.

The US-based JC Flowers is in talks to take over the building society Kent Reliance in a bid to acquire a foothold into the UK market.

And on 29 July, a new venture called Metro Bank is due to open its first branch in Holborn, central London, before rolling out across the capital and, backers hope, the rest of the UK.

In a bid to take on the established players by focusing on consumers, branches of Metro Bank will be open from 0800 until 2000 and at weekends. Cashiers will not be shielded from the public by security screens, and managers hope that free services like coin-counting machines, toilets and biscuits for the dogs of passers-by will attract new customers through their doors.

We shall see.

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House Prices Rose in 2009

The Halifax claim that the average values for houses in the UK rose by £10K in 2009, to £169,042.

Halifax predict that house prices will be flat this year.

However, the economy and its "recovery" rests on very shaky economic and political ground. Quite what will actually happen to the economy during 2010 is beyond anyone's predictive capabilities.

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Double Dip

Deloittes has released the results of its survey of chief financial officers of the UK's leading companies. In summary, the CFOs are optimistic that there will be an economic recovery this year.

However, that recovery will be weak and 48% of those surveyed believe that there will be a double dip recession.

The "good news" is that, in the event of a double dip, the balance sheets of these companies are strong enough to withstand it.

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Self Flagellation

The FT today asserts that Chancellor Darling's bizarre self flagellation over the weekend, when he stated that the UK economy is facing times as bad as any ever seen in the last 60 years, may in fact have been a tad overdone.

Quote:

"The chancellor also claimed this weekend that the economic times facing Britain were arguably the worst in 60 years. His precise meaning has been in dispute but it would certainly be nonsense to suggest the UK faces the worst downturn in six decades.

It is true that in specific areas – trust among financial institutions, in particular – the UK is in very bad shape by historical standards. But, more generally, the assertion is untrue."

I have to concur, quite why the Chancellor came out with this bizarre assertion remains to be clarified. There are a number of possibilities:

1 He knows he is about to be sacked, and wants to go out "with a bang".

2 He has given up and lost the plot.

3 He knows something about the economy that no one else, including other members of the Treasury or government, knows.

Whatever the real reason, it would be advisable for the government and Darling to get a grip; the economy, and the citizens of this country, are not best served by such public flagellation and rifts.

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The End is Nigh

Hector Sants, the chief executive of the Financial Services Authority (FSA), has added his voice to the Greek chorus of doom and gloom that is currently serenading the financial services industry.

He has stated that the era of cheap borrowing by British banks is over. As such, in his view, the banks will revert to more "old fashioned" financial products and "relationship" banking.

Sants makes his comments at an interesting time for the FSA, as it is about to publish an internal review of its handling of the Northern Rock crisis.

He has already admitted that, although the FSA identified the risks in Northern Rock's business model, it failed to communicate adequately the potential problems and to force the mortgage lender's management to address the risks.

In other words, the FSA was asleep at the wheel.

He attempted to redirect the "story" by talking about banks and the ease of obtaining credit. He told the BBC:

"Banks themselves need to give consideration to how their business models will need to adapt to the changed market circumstances they have seen.

Secondly, we will be looking for firms to treat their customers fairly in these arguably more difficult times in prospect."

He predicted that banks would stop pushing complex financial products onto their customers, and instead get know their clients in the long term.

Whilst I agree that the market has changed, and that banks will change their approach, I do not agree that we will see them improving the relationships with customers or indeed even trying to "get to know them".

The credit crunch is a direct result of the greed and stupidity of banks and other financial institutions. They have no intention of being held accountable for this, and are passing on the costs of this fiasco to the retail consumer, via increased interest rates and credit restrictions.

The banks are now so highly automated and reliant on computer driven statistical analysis of their customers, for making decisions, that they will never return to "relationship banking".

Credit decisions are made by computers and statistical models, the banks merely use humans as the interface to try to "explain" (ie obfuscate) their often "bizarre" decisions to their helpless customers.

As regards not trying to push complex financial products onto customers, that is tosh. The banks' greed has not been abated, as soon as they come up with another "pyramid" style scheme (such as sub prime mortgages) they will most assuredly pump and dump it on their long suffering customers.

The FSA needs to wake up to the reality of banking (greed and stupidity) in Britain in 2008, otherwise it will have many more Northern Wrecks on its hands.

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Lending Tightened

The Bank of England (BOE) has warned that the number of households defaulting on their mortgage payments is expected to rise over the next three months.

The BOE also noted that banks were now less willing to lend, because of the higher cost and reduced availability of credit.

Add this to the very gloomy New Year message from the Prime Minister, and it is clear that 2008 is not going to be at all pleasant for those seeking credit or those already in debt.

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Fiddling While Rome Burns

In a sure sign that both the board of Northern Rock and the union representing the staff there have collectively lost touch with reality, it has been agreed between the two bodies that Northern Rock will pay staff a bonus of £200 plus a one off payment of 2% this year together with a payrise of 4%.

No doubt, under normal circumstances, they might be deserving of a bonus and rise.

However, circumstances are very far from "normal" at the moment.

Northern Rock is relying on £30BN of public money to keep it afloat.

Seemingly Northern Rock was warned by Unite, the union representing the staff, that without its staff there would be no company left to rescue.

Well, here's a newsflash for the board and the union:

THERE IS NO COMPANY LEFT, THE PREVIOUS BOARD DESTROYED IT.

If Northern Rock is sold successfully, its name and loan book will be absorbed into the new company; it is as dead as the parrot in the Monty Python sketch.

No matter how delusional the union and the current board are about awarding pay rises, this simple reality cannot be ignored.

You do not reward people for failure.

PERIOD!

This agreement is beyond belief, and indicates that neither the board nor the union have any grasp on reality.

This sends a very bad message indeed to the customers, shareholders and prospective buyers. It may well scupper the sell off, and quite possibly the staff will find themselves without a job in less than a year.

What use then a pay rise?

Idiots!

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Northern Rock Suspened

Trading in Northern Rock shares was suspended for the fifth time in early session today, after the stock slumped more than 41%.

It has now resumed trading, and is currently down around 21% at around 82p.

Congratulations to the board of Northern Rock for destroying this once solid company with their high risk lending strategy. They have succeeded in consigning the company to the dustbin of history, in a similar manner to the board of Marconi.

The shares in Rock are now the plaything of the speculators and will see rises and falls over the coming days that will make some individuals very rich, but will be of no comfort to the long term shareholders who bought in when the stock was valued at over £12.

I trust and assume that those responsible for this will not be receiving golden handshakes when they depart.

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Bloodbath at The Rock

After weeks of mounting pressure, following the destruction of Northern Rock, the CEO (Adam Applegarth) has finally been persuaded to fall on his sword and resign.

Applegarth will leave by the end of January.

His is not the only head to role in this debacle, that has seen not only a major brand/bank destroyed, but the first run on a British bank in 140 years (thus severely damaging the credibility of Britain's financial system and that of the regulatory authorities).

Matt Ridley, the much maligned and invisible chairman, resigned in October; the bank has now announced that four non-executive directors - Sir Derek Wanless, Nichola Pease, Adam Fenwick and Rosemary Radcliffe - will step down with immediate effect.

Applegarth earned £1.36M last year. Northern Rock refused to comment on whether Applegarth would receive a compensation package when he leaves the business. The more pertinent question is whether they actually would have the funds to be able to pay him.

Rock also stated that three further directors - David Baker, Keith Currie and Andy Kuipers - would step down from the board, although they would remain officers of the company.

A complete shambles, and a humiliation for Britain's financial services industry and regulatory regime.

What other horrors are lurking in the woodwork in other banks I wonder?

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A Mere £1.3BN

Barclays sought to calm the markets yesterday by stating that its investment banking business could maintain its growth in spite of a write down of £1.3BN as a result of the credit crunch.

John Varley, the CEO, said that Barclays Capital and Barclays could weather storms in parts of their operations.

The bank wrote down £500m of credit, mortgage and leveraged finance assets for the third quarter of the year and an extra £800m for October.

Mr Varley said:

"We do feel confident about that [Barclays Capital's growth]. It is not unusual in an investment banking business to have some areas that are hot and some that are cold. The sub-prime area, which has not historically been a big area for us, is cold at the moment. We have other areas that are hot."

He added:

"Is the business model working well? Is the risk management working well? Is there diversification by geography and asset class? The answer is in the numbers."

Last week there had been rumours of a massive £4.9BN writedown and the resignations of Mr Varley and Bob Diamond, the head of investment banking.

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Spend Spend Spend

Proving once again that they are immune to all forms of financial shocks, financial reality and the credit crunch; the British consumer intends to have a jolly good Christmas, and spend themselves out of recession.

That at least is the conclusion of a survey conducted by Deloitte.

In its annual Christmas retail survey, Deloitte found that the average person plans to spend a total of £706 on this year's festivities, up from £662 last year.

However, there is a caveat, the initial survey was carried out in September before the credit crunch started to bite. That being said, the question was reasked in November and the answer given was more or less the same.

Richard Lloyd-Owen, head of consumer business at Deloitte, said:

"Early indicators suggest concerns about bruised financial markets and consumer confidence are nothing more than concerns.

The impact of the credit squeeze could play out in coming weeks when events have had time to percolate through consumer mindsets, but we think it's unlikely."

The largest portion of the increase in consumer's planned expenditure is on socialising, with the average spend expected to be £143 up 18% £121.

Quite whether people will be feeling so happy with their expenditure in January, when credit will be hard to come by, is another matter.

However, Christmas is for wants not needs.

That's the real meaning of Christmas!

The British consumer may just save the economy, let us see.

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Fear

The ongoing, self inflicted credit crunch, is producing an atmosphere of fear in the City. Banks and financial institutions are seeing their share prices drop, as investors fret over which one will be next to announce profit write downs and liquidity problems arising from the credit crunch.

Barclays has decided to try to grab the bull by the horns by asking its auditor, PricewaterhouseCoopers (PwC), to help with a breakdown of Barclays' financial performance for a trading statement due on November 27.

On Friday Barclays shares were briefly suspended, as a result of rumours concerning a possible writedown of £5BN.

Barclays quickly denied the rumours, and John Varley (CEO) issued an internal memo to staff assuring them that the business was sound.

Varley, in his memo to staff, said:

"If there were any substance in the rumours that I have been hearing in recent days, we would not have been required to have made a stock market announcement. But we have not."

What we are now seeing is irrational and unsubstantiated fear undermining the stability of sound financial institutions. This needs to be stopped here and now.

As Roosevelt once warned:

"We have nothing to fear, but fear itself."

The financial services industry and the regulatory authorities need to get a grip on this, otherwise what people fear will take tangible form and the financial markets will totally freeze up.

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Fiddling While Rome Burns

Thomas Huertas, acting managing director of wholesale and institutional markets at the Financial Services Authority (FSA), gave a less than ringing endorsement of the quality of staff at the FSA when speaking at the Reuters Finance Summit.

Quote:

"We are operating with the team that we have. It is a high quality team. It is in our view doing the job.

We can always use better quality people. We said we would like to have more quality people and any CVs you push in our direction would be most welcome."

The FSA has come under heavy fire for it's "lightness of touch" in applying principles based regulation, rather than a rules driven approach. The Northern Rock debacle has hardly helped its reputation.

Huertas claims that the full lessons from the Northern Rock debacle will not be clear until next year. Far too long to wait for that, in my view.

Asked if the FSA was operating at full stretch, as a result of the liquidity crisis, Huertas said:

"Yes, it's fair to say that.

We have business as usual to regulate and supervise 20,000 firms here in the UK and there is a huge amount of work on liquidity and capital and large exposures that have dramatically increased and our staff are stretched."

He believes that it is too early to talk about shaking up the tripartite system of regulating banks.

He is wrong.

The Northern Rock debacle provides clear evidence that the current tripartite system does not work, as does the aftermath where each member of the tripartite system (Bank of England, Treasury and FSA) sought to blame the other.

The fact remains that the board of Northern Rock were allowed to destroy the company, without any meaningful intervention from the regulatory authorities.

Make no mistake, Northern Rock in its current form is finished; the fact that the board (aside from the chairman) cling on to office and the FSA claim that no changes in the regulatory framework are needed is a disgrace.

The FSA is fiddling while Rome burns.

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Contact4

Whilst the Treasury, Bank of England, FSA and assorted financial experts argue amongst themselves as to the causes, cures and effects of the current credit crunch and debt crisis that is swamping the UK, they may care to consider the consequences of this to the people in the street.

There are finance companies and call centres that happily cold call thousands of people a day trying to foist unwanted, unnecessary and unwise financial products onto them. They use times of financial uncertainty to their advantage.

Whilst those of us who are financially literate can easily dismiss these calls/offers, as one would swat an annoying fly, there are many in the UK who are not financially literate and who are easy prey for these odious people.

Allow me to provide you with my own personal experience of the type of organisation that operates in this field.

Over the past four weeks or so I have been swamped with cold calls from one particular call centre operating in Scotland, called Contact4. They claim the following:

"Our team of Contact Service Consulting Specialists bring unparalleled experience and deliver the highest standards in both the Inbound - Outbound Industry.

Services provided by Contact4 are underpinned by 4 key principals: Passion, Decisiveness, High Standards and Respect."

The cold calls that I have received from this group claim to be "courtesy calls" on behalf of two finance companies, one of them being Smarter Loans (oddly enough the owner of Contact4, Pearse Flynn, is also Chairman of Smarter Loans).

I have on numerous occasions said quite directly, at the beginning of the call, "no thanks" and put the phone down.

Does this stop them?

No!

The fact that I have been receiving the calls in the first place is rather troublesome:

1 I am ex directory

2 I have not in the last year applied for any credit, nor am I financially distressed, nor am I looking for a loan or extra credit.

3 I have, for a very long time, been registered with the telephone preference service. This means that cold callers are obliged not to call me. Quite why Contact4 have nee calling me is therefore a bit of a mystery.

Last week I formally complained in writing to the Information Commissioner's Office (ICO). The ICO has legal powers to ensure that organisations comply with the requirements of the Privacy and Electronic Communications Regulations.

I have heard nothing back from them, as yet.

However, still being plagued by Contact4 I blocked the number that they used (08445560022) using BT's "choose to refuse" service this week.

That worked until last night, when I received another call from them this time using 08445560020; it seems that their computer has been programmed to navigate around phone blocks.

Fortunately the BT service I use identified the "real" number behind the calls, as being 016131787000. I called this number, and got through to Contact4.

They say they got my number from maybe a data package that they bought.

The upshot being I have instructed them to remove my number immediately, and have also blocked their 0161 number.

Whilst I am well able to say no and to see through the fine print of financial products sold in this manner, there are many who can't and who are being pushed into taking on board products they don't/can't understand or indeed afford.

I would therefore strongly suggest to the Treasury, FSA, Bank of England and all other relevant regulatory authorities that if they want to bring some form of order to our over heated and over burdened credit market they need to address the issues on the front line, such as cold calling.

Those of you who have received calls from Contact4, and want to stop them them, here are their contact details:

Location

Glasgow HQ Address
Cirrus Building
Marchburn Drive
Glasgow Airport Business Park
Paisley
PA3 2SJ

Tel: +44 (0)141 305 2000
Fax: +44 (0)141 305 2001

Campbeltown Contact Centre
Kintyre House
Kintyre Business Park
Snipefield
Drumore
Campbeltown
PA28 6SY

Tel: +44 (0)1631 787 000
Fax: +44 (0)1631 787 001

Dingle Contact Centre
Milltown Business Park
Dingle
Co. Kerry
Ireland

Tel: +353 (0)66 915 3102
Fax: +353 (0)66 915 3101

Gweedore Contact Centre
Gweedore Business Park
Derrybeg
Letterkenny
Co. Donegal
Ireland

Tel: +353 (0)74 953 3300
Fax: +353 (0)74 953 3301

Contact4 Achill
One Stop Shop
Achill Sound
Achill
Co. Mayo

Tel: +353 86 58 6515

Here is their contact webpage Contact4

Gordon Hellyar
Business Development Manager
Contact4
Cirrus Building
Marchburn Drive
Glasgow Airport Business Park
Paisley
PA2 3SJ

Telephone: 01631 787000

gordonhellyar@contact4.com

Here are some of the numbers they use to call:

-08445560022
-08445560020
-016131787000

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Deposit Protection

The government, during yesterday's Queen's speech, outlined its plans to bring in legislation to strengthen protection for bank depositors and institutions "in distress". This is in response to the Northern Rock debacle.

However, as with many political promises, no date has been set.

The Treasury issued a statement:

"The government is committed to extensive discussion and consultation before bringing forward legislation in the forthcoming session of parliament." Noting that the government would do nothing until is was "assured that the benefits of the proposed changes exceed the costs".

The reform would have to meet five preconditions set down by the government:

1 It must be clear and provide consumer confidence

2 Transparent on how it would work in the event of another crisis and credible within the wider market

3 Preserve "critical" retail banking services while customers find another provider

4 Maintain the UK's reputation as a financial services centre

5 Protect taxpayers' interests and ensure "appropriate cost sharing"

A consultation exercise will begin next year, therefore don't expect anything in the near future; unless of course there is another Northern Rock waiting in the wings.

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Taxpayers Can Sue HMRC

The court of appeal ruling in favour of Neil Martin a builder who lost £500K, as a result of errors made by HMRC when it processed his company's Construction Industry Scheme (CIS) application in 1999, leaves HMRC open to being sued by taxpayers for errors.

The ruling means that HMRC has a duty of care to taxpayers, and taxpayers may now sue HMRC for damages in certain circumstances.

This is particularly relevant in cases where the HMRC help taxpayers with their returns.

The result will of course mean that HMRC will no longer offer taxpayers help in completing their returns, as such the process of submitting a return will become even more tortuous and difficult to complete.

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House Prices Fall

House prices in Britain fell for the first time in two years in October, according to a survey by Hometrack.

The average cost of a home in England and Wales declined 0.1% to £176,100 from September. Whilst prices in central London fell by 0.5%.

Consumers are now sitting on debt of over £1.4 trillion.

The Bank of England stated that UK banks have approved the fewest mortgages in 26 months in September. Lenders have granted 102,000 loans for house purchases, the fewest since July 2005 and down from 108,000 in August.

The Bank of England needs to wake up to the fact that, whatever its high moral principles about excess debt, there are a large number of people sitting on debt that they cannot afford to service.

Like it or not, cuts in rates are necessary to avoid the economy going into freefall.

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Lack of Understanding

A study by CreditExpert reveals that most people have a "worrying" lack of understanding about the financial impact of rising interest rates on mortgage payments.

An astonishing 70% of those questioned did not know the effect of a 0.5% interest rate rise on a £100,000 mortgage.

The study also revealed that 80% of five mortgage holders do not know what their Annual Percentage Rate (APR) was.

Given this appalling level of financial ignorance in the UK it is hardly surprising that the banks, credit card companies and other organisations within Britain's lousy financial services industry treat their customers with such contempt.

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