Hardly a day goes by without the big banks being penalised, for the umpteenth time, with a record fine. Yesterday Lloyds was fined £28m for ‘seriously flawed’ sales practices, while RBS was forced to pay the US authorities £62m for breaching US sanctions by dealing with clients in Iran, Sudan, Myanmar, and Cuba.
In the case of Lloyds, more than 1 million products were sold to nearly 700,000 customers, but quite apart from whether these products were genuinely needed, what irked the Financial Conduct Authority (FCA) was the structure of targets and bonus arrangements. That was found to involve sales people being demoted, with a cut in salary of up to 50%, if they failed to hit targets, whilst at the other end of the spectrum ‘champagne bonuses’ were on offer of up to 35% of salary for achieving certain targets, with a one-off ‘grand in the hand’ £1,000 payouts to star performers. Continue reading
Ahead of the report by the parliamentary commission on banking standards, due to report back this week on the future of RBS, Unite, which represents workers at RBS and 120,000 workers altogether in financial services, has called on the government to commit to the full nationalisation of RBS in which the state currently has an 81% stake. This stands in contrast to statements by Ed Balls which, although opposed to Osborne’s planned sell-off, does so on the grounds of timing only, arguing that selling too soon would damage public finances.
Balls said the Conservatives were putting “politics before economics” by trying to privatise the bank before it has been fully returned to health. The union, on the other hand, believes “RBS should become the ‘dynamo’ to drive the UK out of the economic doldrums through lending and support to businesses and communities”. Continue reading
Why not convert a large, publicly owned bank into a network of local banks like those that operate successfully in Germany? Ed Miliband’s speech to the British Chambers of Commerce marked an important step towards filling a vital gap in our banking system – the place where you live.
The UK banking system, dominated by a handful of national and international banks, is highly unusual internationally. Many of our industrial competitors, including Germany, France, Switzerland, Canada and the US, have a diverse range of successful financial institutions in their economies. Crucially, they all have financial institutions that are wedded to their local area. The Labour leader has now come out in favour of a new UK network of local banks, which would finally give British small businesses and local communities the sort of financial services enjoyed in other countries.
The Bank of Credit and Commerce International, which collapsed in 1991, was not widely known as the Bank of Crooks and Cocaine International for nothing.
True, the Bank of England was a bit sniffy about it, largely on account of its connections to the Middle East, and refused to grant BCCI full banking status. Neverthless, the regulatory authority of the day remained perfectly happy for it to act as a second-tier licensed deposit taker in the UK. Continue reading