BRITAIN: Osbourne to Court Bankers at Mansion House with #Brexit on the Cards

#AceFinanceNews – Featured Report:BRITAIN:June.10: Despite a spate of record fines of bankers rigging international rates, miss-selling people insurance policies and bagging huge bonuses, UK Chancellor George Osborne is set to use his annual Mansion House event in the City of London to keep his friends happy.

Against the growing lack of trust in the City, Osborne is set to keep his banking friends sweet. The theme of the chancellor’s speech is the need for a new settlement with the EU, with the City, and in the way the public finances are managed. 

Having won electoral success in May, the Conservative government is keen to use its majority to press on with traditional Tory financial policies, which often means fawning to its City backers and friends. 

The annual Mansion House speech is given by the chancellor to black-tied bankers, the City elite and other grandees – many of whom are Conservative Party donors. Osborne himself has an estimated personal fortune of around $6 million, as the beneficiary of a trust fund that owns a 15 percent stake in Osborne & Little, the wallpaper-and-fabrics company co-founded by his father, Sir Peter Osborne. 

However, the City has been rocked in recent years by rows over huge bankers’ bonuses, despite the global economic crash caused by toxic debt flying around and the credit crunch. In the UK the taxpayer had to bail out both Lloyds and RBS in 2008 in order to keep them afloat. 

The government also had to support Northern Rock and Northern Rock (Asset Management), as well as Bradford & Bingley. The total support package for the ban bailout during 2008-9, according to the National Audit Office, came to an eye-watering $1.85 trillion. 

Bonuses and Record Fines

Not content with having had to bail out the bankers, taxpayers have been angered at their bonuses. This year it was reported that bankers were set to be awarded $7.7 billion in bonuses. Bailed bank RBS handed over $770 million, and Lloyds paid $580. 

In the latest scandal, London-based HSBC is being investigated in several countries for operating a secret bank in Switzerland used by rich people and companies to avoid tax in other states in an ‘aggravated money laundering’ operation. 

Meanwhile record fines have been handed over by banks who admitted rigging international rate systems. In 2012, Barclays Bank was fined $200 million by the Commodity Futures Trading Commission, $160 million by the United States Department of Justice and £59.5 million by the UK Financial Services Authority for attempted manipulation of the Libor and Euribor rates.

All eyes will be on whether George Osborne cuts the bank levy, which has been used to swell the government coffers by taking a charge on the financial sector. Stuart Gulliver, chief executive of HSBC, will be listening very carefully, having threatened to move his headquarters out of London and move back to Hong Kong.

Osborne, however, is unlikely to do anything that will upset his City mates too much. He has too much to lose.

@acenewsservices

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` London Listed Oil Group Reliant on Funds from one of Russia’s Largest Banks Drawn into Takeover Controversy’

#AceFinanceNews – BRITAIN – April 26 – Vince Cable the Business Secretary, has been drawn into a row about the controversial takeover of a London-listed oil group that is reliant on funds from one of Russia’s largest banks.

Sky News has seen a letter sent by the Association of British Insurers (ABI) to Mr Cable warning him that the Stanlow refinery, which produces 15% of the UK’s transport fuel, is being used as collateral in a bid for Essar Energy.

Robert Hingley, an ABI director, said in the letter to Mr Cable that Essar Global, the vehicle of the billionaire Ruia brothers who want to buy the company, had failed to provide any indication of its plans for the Stanlow site in north-west England.

By highlighting the Russian provenance of the financing for the offer, the ABI’s intervention will escalate tensions over the cut-price bid by Essar Global for the 22% of Essar Energy shares it does not already own.
The Ruias listed Essar Energy in London by selling shares less than four years ago priced at six times the price they are now offering.

The cut-price offer has sparked fury from big City institutions, including Standard Life Investments, which in February described it as “cynical opportunism” and “a calculated attempt to deprive minority shareholders of the substantial future upside in Essar Energy’s valuation”.

Under stock exchange rules, because the Ruias already control a majority of the shares, they can declare their offer unconditional even if no other shareholders accept their bid.

Doing so would enable them to de-list the company without a vote, which would either force investors to accept just 70 pence -a-share or to remain shareholders in a more highly-indebted and unlisted company where they possess no influence.

The ABI special committee, which represents major City shareholders including Standard Life and Henderson, has urged Essar Global to commit to a de-listing only if a majority of the independent investors accept its offer.

The Financial Conduct Authority is changing its rules relating to de-listings but has irritated the ABI by not applying that rule-change to takeover situations.

Ace Related News:
1. April 26 – Sky News – http://tinyurl.com/l567o5u

#AFN2014

#abi, #britain, #financial-conduct-authority, #russian, #standard-life

FCA : ` Martin Wheatley ' Admits that the `Regulator 's ' Handling of the ` Investigation ' could have been Handled Better '

#AceFinanceNews – BRITAIN – March 31 – The leader of the Financial Conduct Authority, Martin Wheatley, has admitted that the regulator could have handled the leak of a major insurance sector investigation better (IBTimes)

At the City Week 2014 conference, Wheatley said “whenever markets move like they did on Friday there is always scrutiny.”

“This was clearly not the FCA’s finest hour but it does serve as a timely reminder to all parties involved of the care and thought that is needed when handling significant amounts of information we hold as part of going about our business.”

On 28 March, the FCA leaked some of the details about an inquiry into whether 30 million customers of pensions and other products were “exploited” or mis-sold products.

The leak to the Daily Telegraph, days before the release of a detailed business plan for the coming year, saw £4bn (€4.8bn, $6.7bn) wiped off insurance stocks.

The FCA refused to confirm the report to the rest of the press for hours after the leak but as insurance stocks plunged as a result, Legal & General urged the watchdog to officially confirm and release details.

#AFN2014

#ans2014, #britain, #fca, #financial-conduct-authority, #martin-wheatley

FCA: ` Fines ` Lloyds Banking Group ‘ for Serious Sales Incentive Failing’s ‘

#AceFinanceNews – FCA fines Lloyds Banking Group firms a total of £28,038,800 for serious sales incentive failings

Published: 11/12/2013   Last Modified : 11/12/2013

The Financial Conduct Authority (FCA) has fined Lloyd’s TSB Bank plc and Bank of Scotland plc, both part of Lloyd’s Banking Group (LBG), £28,038,800 for serious failings in their controls over sales incentive schemes. The failings affected branches of Lloyds TSB, Bank of Scotland and Halifax (which is part of Bank of Scotland).

This is the largest ever fine imposed by the FCA, or its predecessor the Financial Services Authority (FSA), for retail conduct failings.

The incentive schemes led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or avoid being demoted, rather than focus on what consumers may need or want. In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted.

Tracey McDermott, the FCA’s director of enforcement and financial crime, commented:

“The findings do not make pleasant reading.  Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart. The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere.

“Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite.

“Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyd’s TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by ten per cent.

“Both Lloyd’s TSB and Bank of Scotland have made substantial changes, and the reviews of sales and the redress now being made should right many of these wrongs.”

The FCA found that both firms had higher risk features in their advisers’ financial incentive schemes which were not properly controlled.  This created a significant risk that advisers would maintain or increase their salaries, and earn bonuses, by selling products to customers that they did not need or want.

The FCA increased the fine by 10 per cent because:

  • The previous regulator, the FSA, had warned about the use of poorly managed incentive schemes over a number of years; and
  • The firms’ previous disciplinary record, including an FSA fine on Lloyd’s TSB Bank plc for the unsuitable sale of bonds in 2003 caused in part by the general pressure to meet sales targets.

The FCA has an objective to protect consumers and the changes made by the firms since the investigation will help ensure their customers are treated better in future. The FCA expects all financial incentive schemes to be designed carefully with good customer outcomes in mind, and the risks they pose must be identified and managed properly.

Both firms have agreed to carry out a review of higher risk advisers’ sales and pay redress where unsuitable sales took place. It is not yet possible to say how much redress will be paid until the firms have identified how many customers are affected. Customers do not need to take any action at this stage to be included in the review and they will be contacted by the firm in due course.

More detail on the FCA’s investigation

The FCA’s investigation focused on advised sales of investment products (such as share ISAs) and protection products (such as critical illness or income protection) between 1 January 2010 and 31 March 2012.

During this period:

  • Lloyd’s TSB advisers sold more than 630,000 products to over 399,000 customers, who invested about £1.2bn and paid £71m in protection premiums.
  • Halifax advisers sold over 380,000 products to more than 239,000 customers, who invested around £888m and paid £38m in protection premiums.
  • Bank of Scotland advisers sold over 84,000 products to over 54,000 customers, who invested around £170m and paid £9m in protection premiums.

The incentive schemes rewarded advisers through variable base salaries, individual and team bonuses and one-off payments and prizes.

Systems and controls used by the firms to manage the incentive schemes were inadequate. While advisers were required to meet certain competency standards to be eligible for promotions and bonuses, this control was seriously flawed and seven out of ten advisers at Lloyds TSB and three out of ten at Halifax still received their monthly bonus even though a high proportion of sales were found – by the firms themselves – to be unsuitable or potentially unsuitable. Further, 229 advisers at Lloyd’s TSB received a bonus even when all of their assessed sales were deemed unsuitable or potentially unsuitable; and 30 advisers received a bonus in the same circumstances on more the one occasion.

The managers that were responsible for ensuring good practice by advisers also had their own performance measured against sales targets – a clear conflict of interest that needed careful management.

The FCA recognises that firms may want to incentivise staff to sell but the risks inherent in any incentive scheme, however well designed, must be managed. In this case the scheme presented significant risks but the firms did not ensure that their systems and controls were sufficient to mitigate those risks.

In September 2012 the FSA published a review into sales incentives, highlighting some of the poor practices used by firms across the retail market including some of the UK’s biggest financial institutions. One institution was referred to enforcement and the FCA can confirm that was LBG.

The FCA is currently conducting follow-up work to see if firms are now managing the risks to consumers from sales based incentives and plans to publish the findings in the first quarter of 2014.

The firms agreed to settle at an early stage and therefore qualified for a 20 per cent discount.

Without the discount the total fine would have been £35,048,556.

#AFN2014

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“Financial Ombudsman’s PPI Claims Will Decline in 2014-15 from 400,00 to 270,000”

Financial Ombudsman Service

#AceDebtNews says according to the latest Financial Ombudsman Service (FOS) newsletter they have forecast volumes of payment protection insurance (PPI) complaints will decline in 2014-15 as it indicated banking and credit complaints are becoming increasingly complex.

PPI ClaimsIn its proposed plan and budget for the next financial year, FOS revealed it expects to resolve a record 320,000 PPI cases, reducing its stock of PPI grievances from 400,000 to 270,000 but warned numbers are likely to remain “substantial”.

The ombudsman announced it intends to tackle 64,000 new banking complaints in 2014-15, as well as another 150,000 new PPI cases at the same time as reducing its budget by 20%.

Tony Boorman, interim chief executive and chief ombudsman, said: “For the last few years our focus has been on building up our capacity to meet the unprecedented challenges of PPI.

“The investment we have made in scaling-up and developing our service is now paying off as we plan for another year of record activity, resolving twice as many PPI cases as we receive. But we’re not out of the PPI woods yet.”

FOS admitted there had been times in the past two years when the organisation received more than 12,000 PPI disputes a week, although numbers have now fallen to around 6,000 cases a week.

The organisation confirmed banking and credit complaints continue to make up the largest area of its work, although the number it has received so far this year is around a quarter lower than it had assumed in its budget for 2013-14.

It warned many of these types of cases are becoming more difficult to resolve as consumers face financial pressures and lenders remain under cost pressures.

FOS has also seen an increase in the number of cases related to various types of short-term credit, including payday loans.

Boorman added: “Across all of our work we continue to hear that people’s dealings with financial businesses remain strained, suggesting a lot more work is required to restore consumer trust in financial services.”

The ombudsman also set out how it will fund its workload, with the announcement it will freeze the case fee paid by businesses at £550, payable only after the 25th case, and will no longer charge businesses the £350 supplementary case fee for PPI complaints.

But FOS warned of a potential shortfall in income for its consumer credit work during 2014-15 and 2015-16, as businesses transfer to the Financial Conduct Authority, which has said it may not recover a levy from companies until 2016-17.

FOS intends to use its consumer credit jurisdiction surplus of £1.7m to offset this and suggested that should a shortage remain it may need to see this recovered through future levies paid by consumer credit firms in 2016-17.

Ace Debt Management Services says: #GetOutOfDebtWithoutBorrowingMoreMoney  

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Strategic Assessment of Risks to UK Consumers and Markets.

The OFT is seeking comments on its Annual Plan 2013-14 consultation,

The official body of people that govern the issuance of consumer credit licences and their use!

The official body of people who govern the issuance of consumer credit licences and their use!

published today alongside its Strategic Assessment of Risks to UK Consumers and Markets.

The consultation sets out the OFT’s proposed objectives and priorities over the next financial year, its fortieth and final year before the transfer of functions to the Consumer and Markets Authority and the Financial Conduct Authority. The OFT intends to continue to focus on work to make markets work well for consumers and the wider economy, alongside ensuring a rich portfolio of cases is handed over to the new institutions.

The proposed areas of focus are informed by the OFT’s first published Strategic Assessment, which identifies key developments and trends in the macro-economic, regulatory, political and social environment – such as economic challenges, demographic change and technological advances. It considers risks to consumers and markets in this context, taking into account the probability of problems arising and impact, should they occur.

During 2013-14, the OFT plans to prioritise work that reflects the following themes:

  • vulnerable consumers and consumers challenged by the adverse economic climate
  • pricing used as a barrier to fair choice
  • novel and developing markets and business practices
  • public services markets
  • closer working with the economic regulators.

These priorities have been developed in the context of a challenging economic climate and are designed to maximise impact against the backdrop of a reduced OFT budget.

OFT Chairman, Philip Collins, said:

‘In the coming financial year, we will remain focused on delivering outcomes that matter for the consumer and the economy, while also preparing the ground for the transfer of the OFT’s functions and the establishment of the new institutions. Publishing our Strategic Assessment of Risks alongside the Annual Plan consultation makes clear the thinking behind our choice of themes and priorities.’

#business, #consumer, #economics, #economy, #financial-conduct-authority, #government, #office-of-fair-trading, #oft, #philip-collins, #social-sciences