The Stench of Corruption and Greed Overwhelms Britain's Financial Services Industry

Britain's tarnished financial services industry and banking sector seems intent on bringing about its own self destruction. Over the years there has been a litany of scandals eg:

- endowment mis-selling
- subprime mortgages
- PPI mis-selling
- LIBOR fraud
- NatWest computer meltdown
- Northern Rock, RBS etc etc to name but a few

However, it seems that the industry is determined to add to its list of self inflicted shame and dishonour. Step forward the usual suspects ie; Barclays (a familiar name), HSBC, Lloyds and RBS which have all admitted to mis-selling interest rate hedges to small and medium sized business customers.

Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have all agreed to immediately halt the sale of complex interest rate hedges to smaller businesses and have pledged to compensate potentially thousands of customers who have been screwed by them.

According to the Telegraph the FSA is of the view that about 28,000 businesses had been sold interest rate hedges.

Another nail in the coffin of the tarnished reputation of the UK's financial services industry.

The financial services industry is now fully immersed in its own self created shit, and quite clearly is on the verge of implosion.

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HSBC Fined £10M

The UK financial services industry has yet again blotted its copybook. This time HSBC's name has been added to the "wall of shame".

The Financial Services Authority (FSA) have fined HSBC £10.5M, and ordered it to pay £30M in compensation, for mis-selling investment products to elderly customers needing long term care.

The FSA said that between 2005 and 2010, a subsidiary of HSBC, NHFA (previously known as the Nursing Home Fees Agency) advised 2,485 customers to invest in investment bonds, and other asset-based products, to fund long-term care costs.

The average age of these customers was 83, a sample review suggested that almost 90% of these cases were mis-sold.

The average amount invested per customer was about £115K.

The FSA ruled that this advice was unsuitable, because these products were designed to be held for a minimum of five years. However, many of these customers were not expected to live this long!

Coupled with the disgraceful mis-sale of this unsuitable product was the fact that the product had charges.

The Telegraph quotes Tracey McDermott, acting director of enforcement and financial crime said:

"NHFA was trusted by its vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.

This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."

Well done HSBC for "enhancing" the reputation of Britain's financial services industry!

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Pensions Crisis Looming

The Office for National Statistics (ONS) has released figures that show that the number of people contributing to personal pensions fell from 7.6M in 2008 to 6.4M in 2009 (a fall of 1.2M).


Contributions by savers into personal pensions fell by over £2BN between 2008 and 2010, from £20.9BN to £18.7BN.

For why?

People are skint, returns are abysmal and the financial services industry in the UK is despised.

The future is bleak indeed!

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Barclays To Settle All PPI Claims

Barclays has confirmed that all PPI customers who made a complaint before April 20 will be reimbursed the total value of all their premiums, plus 8% interest.

This is a hefty kick in the teeth to the "financial ambulance chasing" claims firms, who offer to help PPI victims reclaim their premiums (this is in fact a simple and free task) in exchange for a hefty percentage of the reimbursement secured.

Needless to say these "financial ambulance chasers" will doubtless find another mis-selling trough to stick their snouts into, as the UK's financial services industry is bereft of scruples and the UK public bereft of financial commonsense.

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Metro Bank Opens Its Doors

Britain's financial services industry has, without a doubt, a well deserved lousy reputation for customer care, honesty, service and providing reliable decent products.

Therefore it is to be welcomed that Metro Bank, the first new high street bank in 100 years, has opened its doors today.

Metro Bank claims that it will revolutionise British banking by offering retail opening hours, unparalleled service (eg toilets in branches) and a simple range of products that will be suitable for everyone.

The first branch has been opened in Holborn. It plans to have 200 branches within 10 years.

The bank will keep its branches open from 8am to 8pm Monday to Friday, as well as from 8am to 6pm on Saturday and from 11am to 4pm on Sunday. The bank will be closed on four days of the year; Christmas Day, New Year's Day, Good Friday and Easter Sunday.

However, as with all matters financial, it pays to look at the fine print.

Sadly the products offered are not yet competitive enough to appear on the best-buy tables, many in fact pay below the industry average.

The question is will this bank survive ten years to grow and prosper, or is it just a short term gimmick?

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Eager To Repossess

The Financial Services Authority (FSA) has fined GMAC-RFC, a mortgage lender, £2.8M for mistreating customers who fell into arrears.

GMAC-RFC also has to repay £7.7M, plus interest, to 46,000 borrowers.

The FSA said that the company levied unfair charges on borrowers who fell into arrears with their repayments, and was too eager to repossess their customers' homes.

GMAC-RFC, having been fined, is quoted by the BBC:

"In hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required.

We will be writing to customers who incurred these specific charges when in arrears and will re credit the charges plus interest."

So that's alright then!

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Let The Good Times Roll!

It is heartening to know that the green shoots of recovery are sprouting in the world of investment banking.

A mere 12 months after the near collapse of the global financial system (the UK came close to people not being able to draw cash from their own bank accounts), investment bankers are about to enjoy a record bonus season.

Stock markets in London and New York are enjoying one of the strongest bull runs in decades, and investment banks are preparing to announce huge profits.

The Times reports, for example, that the average London worker at Goldman Sachs will receive approximately £467K in salary and bonuses (a 13% rise compared with 2007 and double the average in 2008).

So that's good news then!

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Ripping Off The Over Fifties

The Times reports that building societies are ripping off the over fifties wrt interest rates offered on ISA accounts.

As from yesterday anyone over 50 will be able to invest an extra £1,500 into their cash Isas, as their allowance will rise from £3,600 to £5,100.

However, "institutions have launched a wealth of accounts to attract older savers' cash — but some are offering poorer rates than their 'mainstream' deals".

Fair comment.

However, as we know, the financial services industry does not discriminate when it comes to ripping people off. The British consumer has been, and continues to be, ripped off by the financial services industry viz:

- bank charges
- PPI
- endowment mortgages
- interest rates
- mortgage charges etc etc

In the eyes of the financial services industry we are all "prostrate cows" ready for slaughter.

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Growth

It seems that the green shoots of economic recovery, at least in the service sector, are returning. Q3 2009 saw the first period of growth in the financial sector in two years.

PricewaterhouseCoopers and the Confederation of British Industry (CBI) report that the number of firms reporting rising business volumes outweighed fallers by 31% to 24% (a positive skew of 7%).

However, the report predicts that up to 60,000 financial services jobs could be lost this year.

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Named and Shamed

The Financial Ombudsman Service (FOS) has finally had the guts to name and shame the worst offending financial services companies in the UK, being those companies that have logged the highest number of customer complaints.

Congratulations to the five major high street banks, which account for the majority of the complaints.

The big five have managed to notch up a staggering 38,286 complaints, out of a total of nearly 70,000 received by the ombudsman in the six months to 30 June 2009.

- Lloyds (which includes HBOS) came top to the league of shame with 15,233 complaints.

- The Royal Bank of Scotland group scored 5,533 of the complaints received by the ombudsman.

- Barclays scored 8,283.

- Abbey scored 2,493 complaints.

- HSBC group scored 2,363 complaints.

- Alliance & Leicester scored 1,786.

The chairman of the FOS, Sir Christopher Kelly, was more than unimpressed. He is quoted:

"I will now be writing to the chairmen of the financial businesses that generate the largest proportion of our complaints workload, to ask them to consider very carefully both their own complaints performance – as reflected in the data we are publishing today – and the complaints performance of their competitors."

As I have noted many times before, the financial services sector in the UK treats its customers appallingly.

Why does it use the word "services" in its moniker, given that "service" is the one thing that it doesn't provide?

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Truly Dismal

Should anyone need convincing as to how badly served the people of Britain are by the financial services industry then all they have to do is to look at the figures covering complaints made to the Financial Services Authority (FSA).

During the period 2006 to 2008 the overall number of complaints increased by 5.7%, from 1.4 million to 1.48 million (8,000 per day!).

The worrying aspect being that these are just the complaints that have been registered by consumers, there are many more.

The British consumer is ill served by the financial services industry.

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The Last Gasp

In the last gasp of a dying government, Gordon Brown attempted to play to the gallery and divert attention from the fallout of his 50% tax rate, by calling for an international debate on a possible cap on bonuses in the financial sector.

Debate there may well be.

However, there isn't a cat's chance in hell of their being a unified international agreement on a cap.

This ploy by Brown is designed to take people's eyes off the flight of capital and skilled resources from London, in response to his 50% tax rate and higher NI contributions.

Brown has bankrupted Britain, and is crippling London's role as the centre of the global financial services industry.

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The Banking Rip Off

As I have noted before, the financial services industry in the UK has an unfailing knack for digging itself deeper into its own shit.

Not content with foisting endowment mortgages, PPI, excess credit card rates, bank charges and other insults on its hapless customers it now seeks to milk them further by "imaginative" and outrageous profiteering charges on mortgage arrears.

Many thousands of homebuyers, many of whom are unemployed, face profiteering penalty charges on top of their regular monthly mortgage repayments.

The Council of Mortgage Lenders (CML) report that the number of mortgages in arrears by three months or more has reached 270,400 (compared with 152,700 at the end of the second quarter of 2008).

Moneysupermarket.com report that Lloyds Group is charging £206 for repayments three months or more in arrears.

GMAC and Abbey charge penalties of £50 and £40, respectively, when the borrower is only one month in arrears.

Halifax charges £35 for every call/letter wrt mortgage arrears, and then has the barefaced cheek to charge £100 for debt advice.

The FSA has a Code of Conduct that requires that lenders treat customers fairly sympathetically.

Evidently the banks haven't read that code, or simply do not care about it.

The Treasury Select Committee is not impressed with either the banks, or the hapless and hopeless FSA. It has attacked the FSA for sitting on its hands.

Britain's financial services industry is rotten to its core.

Until the FSA is expunged from history, and replaced with a more pro active assertive regulatory body, the hapless British consumer can only expect more of the same and continue to be ripped off.

Those who currently are enjoying the fruits of their profiteering should bear in mind the wise adage:

"What goes around, comes around".

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Germany and France Return to Growth

Germany and France have surprised the markets and have returned to growth in Q2 this year, whilst the UK remains stuck in recession.

How has this come about?

1 The UK economy is far more closely tied to the fate of the financial markets than France and Germany.

2 France and Germany have spent far more money propping up their domestic economies via "cash for clunker" payments and job support schemes.

However, before the champagne corks are popped in Berlin and Paris, a word of caution. The government support schemes are coming to a close, both Germany and France will need to increase their exports if the upturn is to be maintained.

One positive quarter does not necessarily make a trend.

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Careless HSBC

HSBC has been fined over £3M by the FSA, for the "careless" handling of confidential details of tens of thousands of its customers.

HSBC's data security failed, causing the bank to send "large" quantities of unencrypted private details via courier to third parties and leave information lying on open shelves and in unlocked cabinets where it could have been lost or stolen.

In two episodes, similar to the datagate fiasco at HMRC,
unencrytped CDs holding thousands of private customers details were lost in the post.

Ironically, one of the lapses occurred after HSBC had received a warning about its security procedures.

The FSA stated that it was shocked that HSBC had acted so carelessly despite warnings.

HSBC, having been hit where it hurts (in the pocket), said that it has taken a "number of remedial actions" including contacting the customers involved, improving staff training and demanding that all electronic data in transit is encrypted.

Stable doors and bolting horses spring to mind!

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Warning These Products Can Seriously Damage Your Wealth

Alistair Darling has announced proposals for the use of cigarette type health warnings on mortgages and other financial products. These would be highly visible, and would be appended to all financial products.

However, much like the warnings on cigarette packets, whether anyone will take the slightest bit of notice of them is open to debate.

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FSA To Increase Fines

The Financial Services Authority (FSA), in an attempt to cast off its sleepy old watchdog image, is attempting to look tough by upping the level of its fines.

In a consultation paper it proposes a new tariff system, for rule breaches committed after February 2010. The new tariffs will fine insider dealers a minimum of £100K, and companies could be hit with penalties of up to £50M.

Margaret Cole, the head of enforcement for the FSA, is quoted in The Times:

"By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules."

All very well, but the FSA will still need to be able to prove misconduct before it can levy these fines.

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FSA Tries To Pull Its Head From The Sand

Our ever "vigilant, pro active and respected" Financial Services Authority (FSA) has attempted to pull its head out of the sand and has proposed that financial advisers should no longer receive commission from selling investments, pensions and insurance products.

Doubtless this will come as welcome news to the millions of hapless endowment policy holders who were mis-sold these useless products in the 80's by commission hungry salesmen!

The FSA said:

"We propose to ban product providers from offering amounts of commission to secure sales from adviser firms and, in turn, to ban adviser firms from recommending products that automatically pay commission."

This being the FSA, even if the rule changes are implemented, they won't come into effect until 2012.

Given that millions of consumers (aside from the endowment holders) were also wrongly advised to opt out of occupational pension schemes, and were conned into buying precipice bonds and split-capital investment trusts, one wonders why it took the FSA so long to pull its head out of the sand and act.

Asleep at the wheel as ever!

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The Role of The FSA

The Financial Services Consumer Panel (FSCP) has given the Financial Services Authority (FSA) a public spanking for the "unrealistic" emphasis on consumer responsibility outlined in the FSA's consultation paper on consumer responsibility.

The emphasis on consumer responsibility, already ingrained in the FSA's philosophy, is being used by Britain's "rip off" financial services industry as an excuse for avoiding their responsibilities to consumers.

The FSCP said that the consultation paper risked shifting the focus on consumer protection away from regulated firms.

The FSA has been more than happy in the past to blame the consumer for financial product failings (eg endowment policies).

Doubtless blaming the consumer makes the FSA's job easier, not least because it is funded by the financial services industry. However, it should remember that its role is to protect the consumer from the unscrupulous financial services industry who seek to sell on products that are over complex and shoddy (eg PPI, endowment policies etc).

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Banks Mislead Customers

As I have noted before on this site, Britain's financial services industry has treated (and continues to treat) its customers with absolute contempt.

The reputation of the financial services industry continues to plummet; endowment mi-selling, PPI, excess bank and credit chargres, high risk lending to the vulnerable, excess bonuses etc have all been nails in the coffin of its reputation.

Founded on the twin pillars of greed and arrogance the financial services industry, despite almost being destroyed by the current self inflicted recession, continues to fleece its hapless customers.

An inquiry by the Banking Code Standards Board (BCSB) noted that over 50% of bank and building society staff were feeding customers misleading information about when funds would be available for withdrawal, and when interest would start to be earned on cheques.

In other words, customers are being lied to.

When will the financial services industry be held accountable for its appalling behaviour and treatment of its customers?

Never, as long as the FSA has anything to do with it!

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