News and Views

Financial services comeback
The UK financial services industry has reported its fourth consecutive quarter of improving profitability. The Confederation of British Industry (CBI) has revealed that the sector is growing at its fastest rate since September 2007.

Around 38% of companies questioned for the CBI report said business volumes rose in the three months to June.However, it is not all good news according to CBI deputy director general John Cridland: “A high proportion of firms are worried about the impact of prospective regulation on their business, and many remain concerned that red tape will hamper growth prospects in the year ahead.”

Life insurers, finance houses and securities traders were the big winners, reporting healthy boosts while banks were still witnessing a fall in volumes.

The brighter outlook is also reflected in a lower-than-expected fall in staff numbers. It is anticipated that the next quarter will see the first rise in staffing levels since the end of 2007.

BBA pledges to work with independent commission
The British Bankers’ Association (BBA) has welcomed the appointment of Sir John Vickers as Chair of the Independent Banking Commission.

Chief executive Angela Knight is looking forward to working with the former chief economist of the Bank of England.

"We are facing unprecedented change and the work of the Independent Banking Commission will play a key role in reshaping the structure of banking regulation in the UK,” she said. “The industry also looks forward to working with Sir John to ensure change is implemented efficiently and effectively and that transition between regulatory authorities does not cause disruption to the financial system.”

The Commission will formulate a number of recommendations to the government related to reforming the banking system and ensuring financial stability.

Knight continued: “The UK has moved further and faster than other major economies on banking reform. We urge the government to ensure all changes take account of the international reform agenda.”

UK-European regulatory link “critical”, says FSA chief
The new UK financial regulator must fully engage with its European counterpart in order to succeed, claims the chief executive officer of the Financial Services Authority.

Hector Sants said that, as the European regulatory environment undergoes major changes, national entities would increasingly become “an arm of European policy”, making full co-operation at European level “absolutely critical”.

Sants also called on future regulators to withstand calls for a return to a lighter touch policy as the current economic crisis becomes a thing of the past, although he stressed that “this will require that they are supported by government and society as a whole”.

HSBC purchases RBS India
HSBC has bought Royal Bank of Scotland’s Indian commercial and retail banking business. The fee for the transaction is believed to be around £63m but, under the terms of the deal, RBS will bear 90% of any losses made over the next two years.

At least one source has already said it is expected that the Indian division will make losses for the next two years, leading to speculation that RBS could, in effect, end up paying HSBC to take the business off its hands.

Despite this, Bruce Van Saun, chief financial officer of RBS, said he was “delighted that our retail and commercial banking colleagues and customers in India will now become part of HSBC, one of the largest and most successful banking groups globally”.

For its part, HSBC said it was an “important addition” to its network in a country of “tremendous growth potential”.

RBS has now sold over 20 non-core businesses across the world. Many of these sales were driven by European Union requirements for banks which received government bail-outs to sell off assets.

Santander slammed for “shoddy service”...
Santander has received stinging criticism for its customer service. The Spanish giant was targeted in an article in a UK daily, which highlighted what it called “shockingly shoddy service”.

Supporting the claims, consumer watchdog Which? recently named Santander the worst bank in the UK for customer service. Complaints centre on slow ISA transfers, incorrect calculation of account interest, tax wrongfully deducted from cash ISAs and customer service staff fobbing off complaints.

James Daley, editor of Which? Money, says: “Our money helpline gets a constant stream of complaints about Santander, mainly about slow ISA transfers and poor customer service. The bank is at the bottom of the pile of our latest customer satisfaction survey. It has a long way to go to come up to scratch.”

The bank itself said it recognised the problem, caused by an exceptionally busy period of ISA transfers and said it had drafted in additional customer service staff as a result.

... but shows its nice side with overdraft review
Santander has also decided to review its charges for overdrafts. A new current account is being launched which replaces interest charges of 12.9% or 19.9%, for customers who have an authorised overdraft, with a daily fee of 50p, up to a maximum of £5 a month.

Unauthorised overdrafts will be charged at £5 a day with fees capped at £50 a month. The lender’s UK director of banking, Nici Audhlam-Gardiner, says: “The overdraft fee structure on the new account is simple to understand and transparent.”

Most UK high street banks have now amended their overdraft charges after coming in for criticism over what was seen as excessive penalties on customers.

RBS Customer Charter welcomed by Which?
The launch of Royal Bank of Scotland (RBS)’s Customer Charter has been welcomed by Which? chief executive, Peter Vicary-Smith. Highlighting the public’s concern about the suitability of financial products, irresponsible lending and poor customer service, he said: “While RBS’s Customer Charter is a positive step to improve performance for consumers, banks must implement the recommendations of the Future of Banking Commission to resolve the fundamental problems in the sector.”

Five Star cashpoints
The Bank of England is supporting a plan to introduce cash machines that only dispense £5 notes. The move will increase the circulation of the notes, putting an end to the abundance of crumpled fivers, and enable shoppers to budget their spending better.

Virgin alters credit payments order
Virgin Money has followed MBNA by altering the order of payments on its credit card accounts. From September monthly repayments will now go towards paying off the most expensive debt first. A UK government directive requires that all UK credit card providers will have to fall into line on their order of payments by January of next year.

The Dirty Half-Dozen
Six mortgage brokers (three of whom were from the same company) have been banned by the FSA for fraud. One claimed that 5% of the mortgage business he submitted was “crooked”. It’s estimated that mortgage fraud accounted for 18% of all reported fraud in the UK last year.

Save something simple
The Centre for Policy Studies wants a “radical simplification” of the UK savings market. The measures it recommends to bring ISAs and pensions closer together include:
• A £45,000 limit on annual contributions for all tax-incentivised savings
• Improved fluidity between ISA and pensions savings
• Allowing partners to fund each other’s pension pots
• Extending auto-enrolment to ISAs.
The think-tank also outlines alternative tax relief structures which it says could save the Treasury up to £8.5bn a year without affecting savings trends.

East meets West in anti-bank sentiment
China has jumped on the anti-bank bandwagon, criticising Goldman Sachs in articles published in the Statecontrolled media. No doubt spurred on by congressional inquiries and public sentiment in the West, China Youth Daily accused the investment bank of “[creating] even bigger losses for Chinese companies and investors than it did with its fraudulent actions in the US”. This was then widely distributed through both commercial and government controlled sites.

Goldman Sachs is arguably the most successful foreign investment bank in the country and, although few specific examples of wrongdoing were alluded to, the report was hot on the heels of similar articles in China’s largest financial newspaper, 21st Century Business Herald.

The reports largely focused on Goldman’s sale of oil hedging contracts to state-owned Chinese companies, which, contrary to the predictions of the bank’s analysts, then lost billions of dollars when oil prices plunged.

However, the greatest condemnation was reserved for Goldman’s apparent success in China, which has seemingly caused consternation and upset amongst both its domestic competitors and certain government elements. In the highly-controlled atmosphere, criticism of state-owned enterprises is rare and frowned upon, whilst foreign businesses are open to tighter scrutiny and public condemnation.

“This is one of the perils of success here,” said a senior banker at one of Goldman’s rivals.

Lloyds: ‘We support new cash ISA rules’
Lloyds Banking Group, the UK’s biggest ISA provider, has put its weight behind the measures recently announced by the Office of Fair Trading (OFT) designed to cut the time it takes to transfer ISA accounts and to enhance transparency about account conditions.

The OFT initiative followed a spate of concerns, culminating in a “supercomplaint” lodged by the lobby group Consumer Focus (see Chartered Banker June-July issue) alleging that millions of ISA-holders were losing out at the hands of banks. Consumer Focus claimed that customers stood to benefit by as much as £14.5m from faster transfer times.

Lloyds TSB will this year go beyond the OFT recommendation by publishing savings interest rates on all customer savings accounts statements (both online and paper). Russell Galley, the bank’s Savings, Investment and Protection MD, says his customers already benefit from fast service via its electronic payments service for cash ISAs.

No compensation culture
Former shareholders of Bradford & Bingley will not receive any compensation for losses, according to an independent valuer. The bank had some 935,000 shareholders when it ran into trouble. Its loan book was nationalised and its retail and branch operations were taken on by Santander.

Shares in the bank closed at 20p on the final day of trading but they had previously been as high as £5.20. A shareholder action group was established, claiming that speculators had helped to drive the bank under. It demanded compensation, claiming that anything below 55p a share was “tantamount to theft”.

That claim has been dealt a catastrophic blow as Peter Clokey from PricewaterhouseCoopers, who was appointed by the government to examine whether any compensation was due, announced his conclusion that they were entitled to nothing.

Clokey said the bank would have fallen into administration anyway without the government bailout, thereby rendering the shares worthless. The B&B Shareholders Action Group has pledged to appeal the decision.

Credit card write-off boom
New figures from the Bank of England reveal that credit card write-offs continue to increase. In the first quarter of this year, the amount written off was £1.25bn, the second-highest total ever recorded.

The situation is unlikely to improve as unemployment rises and the squeeze on household budgets tightens.

However, mortgage write-offs dropped to £160m, the smallest quarterly figure in 18 months. Repossessions fell by 7.5% in the first quarter of 2010 to 9,800, from 10,600 in the last three months of 2009.

A step in the right direction
Backed by Online Dragon and founder and chief executive of Ariadne Capital, Julie Meyer, Barclays ‘Take One Small Step’ competition has been a huge success. Aimed at discovering the 10 freshest business ideas in the UK and awarding each an equal share of £500,000 in cash, there was stiff competition for the regional prizes, with over 3000 entries.

The competition was a timely reminder that Britain’s entrepreneurial spirit is as strong as ever. Recent research conducted on behalf of Barclays found that SME bosses hope to put at least two million people back to work over the next 12 months as they increase employee numbers, including creating 600,000 new apprenticeships.

The competition, launched in March, aimed at individuals and companies with brand new start-up ideas or existing businesses. Entrants were encouraged to make a short video clip to bring their entry to life, before a panel of judges shortlisted a total of 30 business ideas – three each from ten different regions. These shortlisted individuals were encouraged to generate support amongst friends, family and their local community to win votes.

The winners were announced on 15th July, each receiving £50,000 cash to put towards their business and expert advice for a year.

New rules on the way for credit mutuals
Credit unions have come under scrutiny from the Financial Services Authority (FSA), which has just published its almost final version of new rules which it expects will strengthen the sector.

An average of six credit unions default every year, and the regulator wants to improve their financial soundness through a variety of measures:
• New credit unions must have adequate initial capital. Smaller credit unions will need to have initial capital of at least £10,000 with larger ones requiring upwards of £50,000
• Smaller credit unions must have a capital-to-assets ratio of at least 3%
• All credit unions must hold liquid assets of at least 5% of total relevant liabilities – and this cannot be below 10% in two consecutive quarters.

These new requirements will be phased in, fully coming into effect on 30 September 2013. The FSA is hopeful that the timing will help credit unions prepare for new legislation currently before Parliament, at the same time allowing them to extend the range of financial activities offered.

The double-squeeze in banking tightens
The fiscal and capital vice is tightening on Britain's banks. They’re being ordered to boost their balance sheets by as much as £130bn under new rules agreed by world leaders.

And they’ll have to pay more than £8bn over the next four years in a new ‘crisis penalty’ that’s been jointly agreed with France and Germany.

Heads of state and finance ministers at the Toronto G20 summit agreed that banks must keep enough capital on their balance sheets to withstand the aftermath of collapses like that of Lehman Brothers in 2008.

It’ll take until November’s G20 meeting in South Korea to agree by how much the present 8pc capital ratio should be increased, but it may be well into double figures. The measures won’t kick in until 2012.

In addition, the new three-nation levy is expected to set to raise £8.3bn over four years in the UK. It’s set to generate about £1.15bn, rising progressively to an estimated £2.4bn in 2014-15.

Chancellor George Osborne says: "This was a crisis that started in the banking sector and the failures of the banks imposed a huge cost on the rest of society. So it’s fair and right that, in future, banks should make a more appropriate contribution which reflects the many risks that they generate."

The British Bankers' Association (BBA) accepts the reasons for a levy, but warns that it must not be allowed to hurt the competitiveness of the UK as a financial centre.

Investment Accounting Diploma
The new Investment Accounting Diploma launched earlier this year has now successfully completed the first pilot phase. The Diploma is jointly awarded by CIOBS and the Institute of Chartered Accountants of Scotland (ICAS). The Diploma was developed in conjunction with Scottish Investment Operations.

The Diploma consists of the following four topics: Financial Accounting, Finance, Fund Accounting and Technical Accounting. There were 35 candidates in the first pilot phase who attended classes at ICAS premises over a four-month period. Candidates were examined in each of the topics using the CIOBS online examination system.

Enrolment is now open for the second pilot phase of the course, which is due to start in September with classes running through until December.

For further details on the course and the teaching programme please visit www.investmentaccounting.org.uk.

Institute’s qualifications make the list
We welcome the recent publication of the FSA’s new list of Appropriate Examinations for Providing Investment Advice. This is a key milestone in the implementation of the Retail Distribution Review (RDR), and in the development of higher professional standards for the investment advice industry.

The list includes our Diploma in Investment Planning – Existing Advisers, and a separate qualification for new advisers. Uniquely, these qualifications have been designed to support advisers working in the retail banking sector. The focus is on ensuring that advisers can demonstrate their ability to apply the range of knowledge and skills required by the FSA in a familiar, retail banking environment.

Giles Cuthbert, the Institute’s Director of Professional Standards, said: “When discussing the implications of the RDR with the industry, it was clear that there was a need for qualifications that would help advisers working in a retail banking environment develop and demonstrate the knowledge and skills required. We are delighted with the support for this approach from the FSA, and with the response to the qualifications from the banking industry.”

The publication of the new Appropriate Examinations list is only part of embedding higher professional standards in the investment advice sector. Ensuring the continued professional development of advisers through CPD, and demonstrating an ongoing commitment to positive ethical behaviour is equally important. We look forward to working with the FSA and its successors, with banks, and with other professional bodies to continue to raise standards across the banking industry.

Full details of our Investment Planning qualifications can be found at: www.charteredbanker.com

Royal Bank Group joins Approved Employers Scheme
We are delighted to welcome RBSG as members of our AES. They join Airdrie Savings Bank and National Australia Group. AES membership allows us to recognise the development activity that employees undertake at their work place as Continuing Professional Development (CPD). Rather than recording CPD activity on an individual basis, the majority of employees’ development can be achieved within the overall framework of AES.

Janey Smith, Director, Group Organisational Effectiveness at RBS, said: “Achieving CIOBS Approved Employer Status, means we can better support our employees who have worked hard to gain their Chartered Banker qualification. By gaining this they have demonstrated their commitment to continually developing financial services skills and knowledge, and I am keen to support them in maintaining this."

Simon Thompson, the Institute’s Chief Executive, commented: “This helps the many Chartered Bankers employed by RBS to meet the Institute’s annual CPD requirements, and also demonstrates to customers and colleagues the bank’s commitment to maintaining professional standards and competence.”

Please contact us if your employer is not a member of our AES, but is interested in joining.

Upcoming Events
Career Moves – Discover what you most value about your career; what your strengths are; get advice on writing a winning CV; and preparing for interviews. This workshop, from 1.30 to 5.00 on Thursday 26 August, is free to members, although non-members are also welcome on payment of a £55 booking fee. The event is being held at Glasgow Caledonian University.

Institute members can book events on-line in the members section of our website at www.charteredbanker.com, where more detailed event information can be found. We also welcome non-members, who can contact us on 0131 473 7797.

New Chartered Banker Fast Track Route
We have introduced a fast track to Chartered Banker status for CFA Charterholders who wish to develop their knowledge and demonstrate their professionalism in banking. More details can be found on our website at www.charteredbanker.com

Egyptian Banking Institute (EBI)
Our international reach continues to grow as a result of an agreement with the Egyptian Banking Institute. This will enable us to provide professional qualifications to individuals in Egypt and gives us the opportunity to develop joint qualifications with the EBI.

Death of Donald Stewart
We were sorry to learn of the death of Donald Stewart. Donald joined the Union Bank of Scotland Limited from school in March 1948. His career was mainly in specialist departments – Trustee, Law and Securities – at The Mound and Glasgow Chief Office. He became an evening class lecturer in 1984 and, following early retirement in 1989, held part-time lecturing appointments at various further education institutions. He was involved with the Institute’s distance learning programme for a number of years.

Our condolences go out to his three daughters, eight grandchildren and their families.

CIOBS joins LinkedIn
We now have a “members only” group “Chartered Banker”on LinkedIn. It's growing every day, so join now at www.linkedin.com, and take part in the discussions.

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