Banking Blah (Part II)

 

I blogged (see below - Part I) at my disillusionment at the city regulator’s (Financial Conduct Authority) decision to terminate their review into banking practices.

 

On reflection, my disillusionment expanded to anger and frustration when I reflected and delved a little further.

 

The background bit……

 

In January 2013, the FCA outlawed commission in relation to advice on financial products and banned them. As a consequence, the banking sector en masse scrapped their financial advice divisions……the reason had nothing to do with a lack of demand for the service. It was all about the prospect of no longer earning huge commissions. You see, the banks are just a financial product selling juggernaut. Take commission out of the equation and they’ve very little to peddle.  

 

What has become clear since 2013 is that there aren’t enough advisers to meet consumer demand for financial advice and huge parts of society are now DIY financial advisers. Clearly this has its own dangers.

 

Fast forward to 2016 and the FCA is about to publish the findings of its report into the actions they propose to address the lack of financial advisers in the UK. Coincidentally, at the same time they have terminated their review into banking practices relating to risk, pay and bonuses.

 

We have moved 3 years in a complete circle and the solution to the problem is to return to the problem and allow banks to offer advice for huge commissions rather than allow the general public to make big mistakes at DIY financial advice.    

 

Rather than beat the banks with a stick we have to accept that the powers that be have realised they now need help from the banks as they are not being creative enough to think of an alternative. 3 years, millions spent on investigations on what went wrong, millions spent on researching an alternative solution and the winner is……banks. Right back where we started.  

 

I despair.

Banking Blah (Part 1)

The thought of the nation’s taxpayers having to bail out champagne-guzzling bankers with their six-figure bonuses while many faced redundancy and feared for their financial future during the credit crunch made the banks fair game. And to be honest, I’ve never held back at voicing my despair at them.

 

 

We were promised by the then Labour Government that heads would roll. Back in 2008 then prime minister Gordon Brown said UK banks have been taking unnecessary risks. He said: “There have been abuses in our system... and they’ve got to be dealt with too.”

 

 

Since then a knighthood has been lost, millions more taxpayer pounds have been spent examining what went wrong and some fat cats lost their jobs. Interestingly, nobody has been charged with wrongdoing or spent time in jail. It appears being morally corrupt is perfectly legal in the UK.

 

 

Which makes last week’s decision by the Financial Conduct Authority to ditch their review into banking culture all the more baffling.

 

 

I really am starting to think this Government isn’t even trying anymore to pretend they don’t like banks. It is clear that W1 has move than a soft spot for the banking sector. The FCA insists it was their decision to ditch the banking review and nobody in Westminster forced their hand. Honest gov’na.

 

 

Equally baffling is the reasoning for their decision being that each bank is unique and could not be easily compared. That’s like the police saying we can’t really police the streets anymore because each street is slightly different and each burglar has unique reasons for theft.  

 

 

The whole point of the review was to determine whether programmes to shift culture were driving the right behaviour and solving issues such as risk taking and banker pay.

 

 

If we can’t trust the Government and Regulator to hold banks to account, what chance do we really have?

Housing Hurrah

UK house prices are set to continue rising faster than incomes over 2016.

 

Why? Put simply, a rebound in demand from would-be purchasers butting up against a shortage of properties. 

 

The Royal Institution of Chartered Surveyors predicts that average prices will increase 6% during 2016.

 

With interest rates still at crisis-era lows and inflation bumping around zero, most British households have seen a notable improvement in their disposable income over the last year. This has resulted in the UK becoming increasingly confident about making consumer purchases as the economic recovery has consolidated but there has been a ‘dramatic fall’ in the inventory of property on estate agent books……not enough new instructions to replace the stock sold.

 

The words housing and crisis have rarely appeared so inseparable. While housing has leapt up the Government’s agenda, the time lag involved in development mean that prices and rents are very likely to rise.

 

And remember, property is a big deal in the UK……80% of total personal wealth is tied up in property.

 

Dare I suggest that an increase in property prices will increase consumer confidence and we will see an increase in consumer spending in the UK in 2016!

 

The Government aren’t daft……they know that to increase spending they simply have to limit supply of property to keep prices inflated.

 

Simple economic strategy really when you think about it……and we fall for it every time. 

The Year That Was 2015……

 

It was quite a year for significant news in my world. Here are the 12 global events that shaped financial markets over the past year.

 

January - Oil Price Decline

The price of Brent crude oil dipped to below $50 a barrel for the first time since May 2009, leading to revenue shortfalls in many energy-exporting nations. Expect oil price to dominate news throughout 2016 also.

 

February - World Conflict

Russia and Ukraine agreed a ceasefire in eastern Ukraine in February but 2015 saw a number of violent conflicts across the globe. Events in Syria, the Middle East generally and the terrorist attack in Paris dominated our news feeds.

 

March - Strong US Dollar

The Dollar enjoyed its quickest rise in 40 years in March. America’s economy excelled while others – like China’s – struggled.

 

May - UK Election

With the threat of a hung parliament concerning many, David Cameron led the Conservatives to a majority election victory in May. Surprise and relief for the majority and a bullet dodged!

 

July - Grexit

Greece missed a €1.5bn debt repayment to the International Monetary Fund, after Eurozone ministers refused to extend the country’s bailout. A resolution was eventually found but we’ve not heard the last of this story I fear.

 

August - Rising Correlations

As expectations of a Fed interest rate increase grew, the correlation between stocks and bonds also began to rise during the summer. Not unprecedented but painful nonetheless.

 

August - Chinese Black Monday

China experienced its biggest one-day fall since 2007, with fears the world’s second largest economy was heading for a full-blown crisis. The causes were mixed and many but they were exacerbated by the increasing intervention by Government authorities. Hopefully the lesson was learnt. We shall see.

 

August - Fed Flinch

Given concerns over China and the collapse of oil prices, the Fed resisted the urge to raise US interest rates for the first time since 2006 and delayed until December.

 

August - Bond Market Liquidity

The Bank of England raised concerns that efforts to make British banks better regulated may have had a detrimental effect on bond liquidity. As a result, the fear today is that bond investors run for the exit en masse and find the door too small, resulting in significant price volatility

 

September - VW & Glencore

Volkswagen was embroiled in an emissions test scandal, which impacted around 11 million cars. Meanwhile, the world’s biggest mining company, Glencore, saw shares plummet. The word ‘ugly’ springs to mind.

 

October - UK Inflation Remains Negative

UK inflation remained negative at -0.1%, the first time two consecutive monthly readings had been below zero since CPI records began in 1996. A cause for concern? We shall see!

 

December - Merger & Acquisition Activity

2015 set a new record for mergers and acquisitions, with total global deals eclipsing previous highs.

 

So that you have it……2015 was quite a year!