PPI - Pretty Poor Impact

Lloyds has admitted shortcomings in the handling of complaints at a centre set up to deal with PPI mis-selling. It comes as an undercover reporter at The Times said staff at one of the bank's complaints handling centres had been taught to "play the system".

 

The facts so far highlight that Lloyds has paid out £4.3 billion to 1.3 million customers who were victims of the PPI mis-selling.

 

These figures are despite Lloyds staff being told to ignore possible fraud by Lloyds salesmen and that most complainants would give up if rejected the first time.

 

Which begs the question......what should the true figure of compensation be?

 

When 'we' have a 40% stake in a company that we want to sell, a queue of buyers is hardly likely to form with this likely to hang on for far longer and at greater cost.

 

Another great example of a morally corrupt banking sector and an incompetent Government clueless in effective regulating.

 

Very sad.

Basel III

The Story……

Since the banking collapse, banking standards have been raised across the EU to reduce the risk of such a financial bomb going off again. The key measure has been to force banks to increase the cash reserves it holds to meet ‘issues’.

 

The science bit……these guidelines (known as Basel III) require banks to hold capital resources of at least 7% of their ‘risk-weighted assets’.

 

The Prudential Regulation Authority (PRA) is responsible for monitoring and recording this as part of banking regulation. So, you can imagine the ‘stir’ that has been caused when they have reported that Britain's top banks / building societies need to fill a £27.1 billion hole in their balance sheets to meet it’s reserves.

 

So……is your glass half empty or half full?

 

Half Empty......

RBS and Lloyds face the biggest shortfalls in their capital requirements……both part owned by ‘us’.

 

RBS was the regulator's main cause of concern, accounting for £13.6bn of the total. Lloyds Banking Group accounted for £8.6bn. The need for capital reserves will only delay any sale of these banks and prolong the prospect of any financial return for our ‘investment’. 

 

Half Full......

The regulator is doing its job……identifying the issue and publicising the results. Box ticked. The amount of cash reserves a bank must hold does not have to be implemented until 2019. However, knowing the current issues allows banks to plan to fund the shortfall. Box ticked.

 

For what it is worth, my glass is ‘half full’ on this……it can only be a good thing bringing the issue to light. However, £27.1 billion is a huge amount to find before banks will offer cheaper / simpler money to get the Private Sector and housing market moving again.

 

The financial constipation continues......

 

 

Horrible Shareholders

If we have learnt anything from the 81% ownership the Government 'acquired' from the bailout of RBS (for a cool £45 trillion), it’s that Westminster are horrible, lousy and problematic shareholders.

 

When a Government owns a large stake in a company, politics will always form its running rather than commercial logic. Since RBS's bailout, we have seen a Labour Government fail and then the Coalition fail at having a clear exit strategy for our £45 trillion investment.

 

Politics is hardly a hot bed of commercial excellence. MP's work for a not for profit organisation and we know from the budget deficit accrued over a generation or three that they simply cannot make income needs match expenditure for the UK. A simple truth.

 

So what next for RBS?

 

I'm all for selling the 81% shareholding......some to the public and some to private investors. This would return the bank to a truly commercial environment and let demand and supply dictate all.

 

What's there to lose......we are already £45 trillion out of pocket!

 

Time will tell.

 

 

Hester Hustle

After 5 years at the coalface, Stephen Hester has announced his resignation as RBS chief executive. The subsequent fall of RBS's share price (wiping £2 billion off the value in minutes) tells you all you need to know..... he's done a good job.

 

The big win during his term has been shrinking the toxic assets from £300 billion to £50 billion. Equally as important has been the rebuilding of capital and liquidity to respectable levels. Or to put all of this another way......the Hester Hustle defused the biggest balance-sheet time bonb in history.

 

Forget the political spin and red top rubbish, a quite remarkable job has been achieved......well as far as polishing a turn can.  

 

Take a bow Mr Hester.

 

 

For Sale

A 39% stake in a failing bank......Lloyds Banking Group.

 

It is sold as part of a package with other failed, useless and very risky banks, namely Halifax and Birmingham Midshires. 

 

It comes complete with branches in every major town in the UK and years of loss making misery guaranteed. 

 

Bought for £20.5 billion in 2009 and looking to sell for the same price. 

 

One far from careful owner. 

 

Strictly no time wasters as that is what the current owners are. 

Too Much Co-Operation

Lessons Still Not learnt 

 

The story causing most confusion and concern to the financial sector at the moment is the Co-op Bank's proposal to buy 631 Lloyds branches that would effectively triple the size of their banking operations. 

It was doing this with the blessing of the Treasury and Chancellor of the Exchequer, who last year hailed the Co-op's expansion as creating "a new challenger bank" that would give "real choice to customers and supports the economy".

What's more (and crucially), the regulator (Financial Services Authority) did not object to the Co-op Bank’s expansion.......which all looks a little odd now.

 

And here's why......

 

Where a bank lends money either to a personal customer or a business, it must set aside money in case it's never repaid. The more riskier the loan / mortgage, the more it must set aside for a contingency buffer. Simple and effective.

 

The problem is……Co-op Bank has just realised that it has not set aside enough cash......to the tune of around £800 million. Or to put that another way, it can't manage the banking operations it has currently (before it trebles in size) and it may need a bailout out.

 

So why oh why did Lloyds, the Financial Services Authority, the Treasury, the Chancellor of the Exchequer and the Co-op board all agree that they were the best buyer of Lloyds's branches just months ago without looking at the balance sheet to gage their current effectiveness? Shameful.

 

Is it just me or are there still too many clueless idiots working in the banking sector and the regulation of it? 

 

 

Taxing Stuff

One of the big stories of the week relates to Amazon and Google. They have collectively made sales of £6.4 billion or as I like to call it £6,400,000,000 (for dramatic effect). Yet, they paid tax of only £6.6 million. That's an equivalent tax rate of 0.1%!

Never one to miss an opportunity to jump on the back of a popular news story and earn some popularity points, MP's flocked in anger and uproar.

Google and Amazon are not the story here. The continued procrastination of Westminster is the real ‘nuts and bolts’ of the issue. MP's can be as angry as they want at companies manipulating the tax system......but they have the power to change it and make it transparent and easier to regulate. It really is that simple. But that would take effort and thinking outside of the box......not something they have ever been top of the class for.

Is some joined up thinking really out of the question Westminster?