HSBC pays £2.8 billion in fines and mis selling compensation
HSBC paid out £2.8 billion last year to cover the cost of fines and mis selling compensation.
As well as £1.26 billion in fines for money laundering, the bank also set aside another £1.53 billion for mis-selling financial products in the UK.
The figures came as HSBC reported rising underlying profitability and revenue in 2012, and an overall profit before tax of £13.73 billion.
Chief executive Stuart Gulliver’s total remuneration for 2012 was some £4.66 million compared with £4.46 million the year before.
And after taking account of the deferral of pay this year and in more highly-remunerated years previously, Mr Gulliver actually received £9.4 million in 2012, up from £7.06 million in 2011.
The company’s 16 top executives received an average of £3.26 million each.
Globally, 204 employees were paid more than £1m last year, of which 78 were in the UK where the group has its headquarters.
“HSBC made significant progress in 2012 despite a challenging operating environment characterised by low economic growth and a changing regulatory landscape,” said Mr Gulliver.
While acknowledging the bank’s past anti-money-laundering and sanctions failings, he said the bank’s performance had been strong enough to allow it to increase its dividend by 10%.
HSBC was fined by US and UK regulators for breaking various laws against doing business in Syria and Iran and with Mexican drug cartels.
HSBC set aside more money to cover the expected cost of past misdemeanours in the UK.
During a conference call to present the results, Mr Gulliver told investors that the bank was not reconsidering whether to relocate its headquarters from London back to Hong Kong, in order to avoid a recently agreed worldwide cap on bonuses of all employees of banks based in the EU.
Business rose strongly in Hong Kong and the rest of Asia, and the bank said it saw a sharp turnaround in Europe.
Some 90% of the bank’s earnings now come from outside the UK, while about 40% comes from the Asia-Pacific region.
Meanwhile, HSBC confirmed that its staff numbers had fallen by 10% to 260,591, as it seeks to cut costs and sell off some businesses, with Mr Gulliver telling investors that the focus on costs remains “absolutely overwhelming”.
But HSBC’s results also reflected the continuing gradual recovery of the global economy from the 2008 crisis.
Loan impairments – a measure of how much money has been set aside for loans that cannot be repaid – fell by a third in 2012 to £5.53 billion worldwide.
March 14, 2013
Tags: bankers, banks, Credit Crunch, Debt Crisis, Loan calculator, UK loans rates Posted in: Bank Lending, Bankers, Banks, Financial Services, Loans Calculators, UK Loans Rates, Uncategorized 
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Negative interest rates idea floated by Bank of England
The Bank of England’s deputy governor Paul Tucker has floated the idea of seeting negative interest rates.
A negative interest rate would mean the central bank charges banks to hold their money and could encourage them to lend out more of their funds.
Speaking to MPs on the Treasury Committee, Mr Tucker said: “This would be an extraordinary thing to do and it needs to be thought through carefully.”
He said it was one of a number of ideas that he had put up for consideration.
“I hope we will think about whether there are constraints to setting negative interest rates,” Mr Tucker told MPs.
Any discussion of negative rates would have to take into account the likely detrimental impact on savers, who have already seen the income from their savings fall since the financial crisis.
With interest rates at a record low, there is little scope for central banks to use conventional means to stimulate the UK’s weak economy, which has dipped in and out of recession since the 2008 financial crisis.
The Bank has resorted to quantitative easing (QE), pumping billions into the economy.
Minutes of the last meeting of the Bank’s policy setting committee showed that the governor, Sir Mervyn King, was outvoted in calling to expand QE from its current level of £375 billion.
During that meeting other policy measures discussed included buying assets other than government bonds. It also considered reducing the Bank rate, which is currently 0.5%, and is the rate which directly influences mortgage and loan rates.
In addition, the committee looked at reducing the marginal rate of interest on bank reserves held at the Bank to encourage them to lend more. When negative interest rates were introduced in Denmark, it was this rate which was cut below zero.
The Bank of England minutes showed that the committee, “had noted drawbacks with each of these options in the past ; those drawbacks remained”.
But it is clearly in the Bank’s thinking even if not adopted at this stage. The Danish central bank has already gone down this route. The theory is that commercial banks are depositing too much cash in the vaults of the Bank of England.
To encourage them to withdraw the money and lend it elsewhere they would not be paid interest and instead would be charged a fee (negative interest) for holding cash at the Bank of England.
There would not be negative interest on High Street deposits but banks would almost certainly react by cutting savings rates and raising current account charges. The big risk is that any gain in lending by banks would be matched by losses for savers and damage to banks’ profits.
March 12, 2013
Tags: Credit Crunch, Debt Crisis, finances, Interest Rates, Loan calculator, recession, UK loans rates Posted in: Bank Lending, Bank of England, Borrowing Costs, Credit Crunch, Debt Crisis, Financial Services, Interest Rates, Loans Calculators, UK Loans Rates, Uncategorized No Comments
£645 million in lost bank accounts recovered
Up to £645 million in forgotten funds in bank accounts has been returned over the past five years through a free tracing service run by the financial industry.
Around 315,000 people have used My Lost Account since the scheme was launched in 2008, its operators said. The website is at: http://www.mylostaccount.org.uk/
And 580,000 search applications have been made, they added.
Users can find lost cash sitting in dormant accounts in banks, building societies and National Savings and Investments.
NS&I alone has reunited customers with more than £445 million through its tracing service and My Lost Account, which is run by NS&I, British Bankers’ Association and the Building Societies Association.
“Even small amounts of money can help with the costs of day-to-day living, so it’s important people keep a track of their savings,” said NS&I’s retail customer director John Prout.
The BBA and BSA both had pre-existing schemes but still received 400,000 applications between them, returning £200 million to customers.
The BSA’s head of savings Brian Morris said: “During these tough economic times every penny counts and as such, we fully understand the importance of the scheme and will do all we can to ensure as many people as possible become aware of this free and easy to use service.”
Unused cash in bank accounts that had been dormant for more than 15 years can be used to fund social investment under the the Dormant Bank and Building Society Accounts Act from 2011.
March 8, 2013
Tags: bank lending, banks, finances, financial services, Loan calculator, UK loans rates Posted in: Bankers, Banks, Finance, Financial Services, Loans Calculators, UK Loans Rates, Uncategorized No Comments
Credit reports- lenders gathering more personal data about you
Growing amounts of personal details about individuals’ financial lives are being used to judge whether applicants are given loans and mortgages.
This history is then put into a credit report which is used by lenders to decide whether loan applicants are likely to make repayments in the future and whether they are a safe bet to lend money to.
The three credit reference agencies in the UK are Experian, Equifax and Callcredit. They use a range of data, from the register of voters to credit card payments, to build up reports on individuals. Everyone has the statutory right to see their report, usually for a £2 fee.
Information usually included in a credit report:
- Information from electoral roll
- Credit accounts, such as credit cards
- County Court judgements
- Credit checks by lenders in the previous 12 months
- Joint accounts or other shared financial commitments
- Current account overdraft balance
- Home repossessions
Source: Equifax
In a report, the credit history lists credit accounts, the date they were opened, the credit limit or loan amount, and whether the individual has missed any payments. Account details from after 1994 are included, and remain on a report for six years after being closed.
These agencies are continually trying to increase the amount of detail these reports hold, to allow lenders to make a more considered decision on loan applications.
There is no “blacklist” of people who will not be given credit – each lender analyses the information according to its own rules, so applicants may be turned down by one company but accepted by another.
Information about credit cards, bank accounts and mobile phone contracts is regularly shared with these agencies.
Some water and energy companies already tell credit reference agencies whether customers miss paying, or are late paying, bills more than three times.
Personal data not detailed on credit reports
- Credit accounts from before 1994
- Student loans
- Information about third parties, such as loved ones
- Savings accounts, fines, Child Support Agency details, medical history, criminal records
Source: Equifax
March 6, 2013
Tags: borrowing, debt management plans, Interest Rates, Loan calculator, loans, UK loans rates Posted in: Borrowing Costs, Credit Companies, Debt Management, Lenders, Loans Calculators, UK Loans Rates, Uncategorized No Comments
Libor interest rate setting- still not clean despite scandal
The way that the key Libor interest rate is set in the UK is still not clean and free of fraud according to a top US regulator.
A number of banks have been fined hundreds of millions of Pounds for rigging the lending rate.
Libor, which is set in London, is meant to reflect the average rate that banks pay to lend to each other and is used to benchmark everything from car loans and mortgages to complex financial transactions around the world.
The Libor scandal emerged in June last year when UK and US authorities fined Barclays £290 million for fixing the key inter-bank interest rate. Since then, Swiss bank UBS and Royal Bank of Scotland have been given fines of £940 million and £390 million, respectively.
According to the CFTC, which hit RBS with a £208 million fine, RBS made hundreds of attempts to manipulate the rates and succeeded on a number of occasions.
Libor – the London inter-bank offered rate – is a benchmark interest rate set each day by the British Bankers’ Association. It is based on estimates received from 16 major international banks based in London of how much they must pay in order to borrow cash from other banks.
Barclays, for example, submitted lower rates during the financial crisis to reduce the appearance that it was having trouble raising funds, as a higher cost of borrowing indicates other banks are concerned about its financial position.
A government-commissioned review suggested taking the responsibility away from the BBA and placing it in the hands of an outside authority, such as a commercial body or an industry group.
MPs on the Treasury Committee published their report “Fixing Libor” in August, which said the FSA had failed to investigate market rumours of rate-rigging properly.
In its report of last year, the Treasury Committee blamed Barclays bosses for “disgraceful” behaviour, which damaged the UK’s reputation, but was also critical of regulators.
It said the Bank of England had been “naive” about the possibility of Libor manipulation during the financial crisis and had been “relatively inactive”, but said the failure of the FSA to do its job and properly investigate the market rumours was far worse.
It said the FSA had not identified any “weakness in compliance” at Barclays, despite conducting numerous visits.
The FSA responded by saying it had increased the intensity of its supervision since 2008, focusing on firms’ control functions and board oversight, and that its successors – the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) – would build on this new approach to supervision.
The regulator also noted the committee’s concerns that it had been two years behind US regulatory authorities in initiating its formal Libor investigations.
But it said it had been aware of and engaged with the enquiries made by US regulators in 2008 and 2009 and had assisted the CFTC from the outset of its investigation. Once evidence of potential wrongdoing emerged it took more active steps, it said.
March 4, 2013
Tags: bank lending, bankers, banks, borrowing, Interest Rates, Loan calculator, UK loans rates Posted in: Bank Lending, Bankers, Banks, Borrowing Costs, Interest Rates, Lenders, Loans Calculators, Loans Rates, UK Loans Rates, Uncategorized No Comments
UK public sector borrowing rises slightly
The UK government borrowed slightly more than expected in December- fuelling fears that the UK could lose its coveted AAA credit rating.
UK public sector net borrowing, excluding financial interventions, hit £15.4 billion in December, the Office for National Statistics (ONS) said.
That marked a small rise from the £14.8 billion borrowed in December 2011.
The headline figure was slightly worse than expected – analysts had forecast borrowing of £15.2 billion.
December’s figure takes total borrowing so far this financial year, excluding a transfer of Royal Mail pension assets, to £106.5 billion, some £7.2 billion more than for the same period in 2011.
A Treasury spokesman insisted that the economy was healing and said that the figures indicated a gradual recovery.
The Pound fell against the euro immediately after the data was released – trading 0.2% lower at 1.1872 euros.
The data showed that government receipts rose 3.6%, while spending grew 5.4% in December compared with a year ago.
The broader public sector net borrowing measure – which includes the cost of bailing out the UK’s banks – rose to £13.2 billion in December from £12.6 billion a year ago.
The UK’s total public sector net debt, excluding the cost of bank support, is now £1.11 trillion, or 70.7% of GDP.
All three of the major credit ratings agencies now have the UK’s AAA rating on negative outlook, meaning they could downgrade its rating if performance deteriorates.
In his Autumn Statement in December, Chancellor George Osborne acknowledged public finances were taking longer to rectify than planned, and admitted he would be forced to extend austerity measures by at least another year.
The news on public sector finances comes days before economic growth (GDP) figures are expected to show the economy contracted in the final three months of 2012.
February 28, 2013
Tags: borrowing, Credit Crunch, Debt Crisis, Loan calculator, recession, uk recession Posted in: Borrowing Costs, Credit Crunch, Debt Crisis, Financial Services, Loans Calculators, UK Loans Rates, Uncategorized No Comments
Barclays to close tax avoidance advice business
Barclays is to close down a controversial advice business which helps clients avoid tax.
The bank will announce that part of its Structured Capital Markets (SCM) business will be axed as part of a wide-ranging strategic review.
The move comes as part of the bank’s attempts to improve its image following a string of scandals.
Barclays was fined £290 million over the Libor-rigging scandal last year, and has set aside nearly £3.5 billion to cover possible payouts related to the mis-selling of payment protection insurance (PPI) and interest rate investment products.
Barclays chief executive Antony Jenkins has tried to place more emphasis on the ethics of the bank’s practices since taking over from his predecessor Bob Diamond, who resigned in the wake of the Libor scandal in July.
Mr Jenkins’ strategic review of the bank, dubbed the “Transform” programme, is also expected to involve 2,000 job losses in the investment banking business.
Barclays is expected to continue helping clients with their tax arrangements, but will not engage in activities where the main purpose is to avoid tax.
“There are some areas that relied on sophisticated and complex structures, where transactions were carried out with the primary objective of accessing the tax benefits,” Mr Jenkins said.
“Although this was legal, going forward such activity is incompatible with our purpose. We will not engage in it again.”
According to insiders, the closure of the tax SCM unit marks an important and significant break with the past. At its peak it accounted for most of Barclays’ investment banking revenue.
Former chancellor Lord Lawson, a member of the Parliamentary Banking Commission, last week accused Barclays of being involved in legal tax avoidance on an “industrial scale”.
Earlier this month Mr Jenkins waived his bonus for last year, thought to be about £1 million, following what he described as a “difficult” year for Barclays, and warned that others would also be cut.
February 19, 2013
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Personal insolvencies fall to four year low
The number of people being declared insolvent in England and Wales fell last year to the lowest level since 2008, the Insolvency Service has said.
There were 109,477 individual insolvencies last year, down 9% from 2011.
In the final three months of 2012, 25,302 people were declared insolvent, down 10% on the previous quarter.
The Insolvency Service figures showed that the number of firms going bust in England and Wales also fell.
The number of receiverships, administrations and company voluntary arrangements among companies fell by 8% last year to 4,593, the lowest level since 2007.
In addition, there were 16,138 compulsory liquidations and creditors’ voluntary liquidations last year, down 4.4% on 2011. These figures count the final winding up of firms at the end of the insolvency process.
There has been a renewed spate of retailers falling into administration recently, including such well known names as HMV, Blockbuster, Jessops and Comet.
The continued pressure on consumers, with wage and salary increases being outstripped by inflation, is expected to rein in spending and lead to more retailers closing down this year.
In the category of personal insolvencies, the number of people going bankrupt continued to fall, to 31,765 – their lowest level since 2003.
Forms of personal insolvency:
- Bankruptcy: The traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets including your house to pay something to the creditors
- Individual voluntary arrangement (IVA): A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go or over a number of years
- Debt Relief Orders: Introduced in April 2009, these allow people with debts of less than £15,000 and minimal assets or surplus income to write off debts without a full-blown bankruptcy
However, the number of people granted a debt relief order – a procedure first introduced in 2009 – reached a new high of 31,207.
One feature of the economy in the past few years has been the reluctance of banks to pull the rug from under struggling companies.
Banks have been under intense pressure not to be too aggressive in recouping bad loans made to firms that now appear insolvent, an approach known as forbearance.
February 14, 2013
Tags: Bankrupcy, Credit Crunch, Debt Crisis, debt management plans, Loan calculator, uk recession Posted in: Bankrupcy, Credit Crunch, Debt Crisis, Loans Calculators, Uncategorized, Unemployment No Comments
Deutsche Bank posts losses on legal risks and bad debt write offs
Deutsche Bank has reported a surprise loss of £1.8 billion for the fourth quarter of 2012.
It came after Germany’s biggest bank chose to set aside 1bn euros to cover potential litigation costs and to write off £1.52 billion in bad investments.
The write-offs are the result of a restructuring that involves the hiving off of many non-essential businesses.
The bank may face lawsuits related to the manipulation of Libor, as well as other recent scandals.
By admitting their culpability to regulators, the banks open up the possibility of being sued by investors and borrowers whose interest income and payments were affected by the manipulation.
Deutsche has also been involved in two other recent scandals. In December, its offices were raided by German authorities seeking to prosecute some of the bank’s employees, who they claim enabled tax evasion and money laundering by means of the European market for carbon emissions permits.
Separately, the bank has also been implicated in arranging financial transactions aimed at concealing losses made by Italy’s oldest bank, Banca Mante dei Paschi di Siena.
Despite the fact that most analysts had been expecting Deutsche to report a modest profit for the quarter, financial markets reacted positively to the results, with the bank’s share price rising 3.4% on the Frankfurt Stock Exchange.
Partly this was because markets took the view that the losses demonstrated that Deutsche’s new management was tackling the bank’s long-term problems head-on, and partly this was because the bank’s underlying business position seemed to be improving, with revenues up 14% to 7.9bn euros.
Management had warned in December that it was likely to write off a significant portion of the 125bn euros in investments and businesses that the bank no longer deems of strategic importance and is therefore transferring to a new “non-core” division.
Many of the assets that the bank is dispensing with require large amounts of capital – the buffer of shareholder money that all banks are required by regulators to hold against potential future losses.
Deutsche hopes that its restructuring plan will help it achieve new, higher international capital requirements well ahead of schedule.
February 12, 2013
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UK banks to begin small business mis-selling review
The UK High Street banks have been ordered to begin reviewing all interest rate hedging products they may have mis-selling to small businesses.
The Financial Services Authority (FSA) said Barclays, Lloyds, HSBC and RBS would seek to identify and provide redress to all customers affected.
The FSA’s announcement follows its own review of 173 such sales last year, of which more than 90% broke regulations.
The products were typically sold to apparently “protect” borrowers from rising rates.
In many cases, banks insisted that small business clients, such as care home providers, veterinary surgeons and pub landlords, had to take out the hedging products as a pre-condition for receiving a loan.
Businesses that bought the products before the 2008 financial crisis were then unable to benefit from the Bank of England’s decision to cut interest rates to a historically low 0.5%. Many found they could not terminate the arrangement without paying enormous fees to their lenders.
In some cases, the product was for a larger amount or lasted many years longer than the loans they were supposed to be hedging.
The FSA said that it hoped that five other lenders – Allied Irish Banks, Bank of Ireland, Clydesdale and Yorkshire, the Co-operative Bank and Santander – would launch their own reviews by 14 February.
The banks will contact customers directly, and the FSA said there was no need for customers to engage a financial adviser.
The regulator said that of the sample of hedging products it had itself reviewed, a significant proportion would result in redress.
However, it cautioned that its review had covered some of the more complex products sold and might therefore overstate the proportion of all products that were mis-sold.
“Where redress is due, businesses will be put back into the position they should have been without the mis-sale,” said Martin Wheatley, the designated chief executive of the Financial Conduct Authority, which is due to take over responsibilities from the FSA this year as part of a reorganisation of banking supervision in the UK.
“But it is important to remember that this review is firmly focused on the particular circumstances of each sale. These will determine whether there were failings in the sales process and, if so, whether redress is due.”
February 7, 2013
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