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A round-up of news and developments in banking and financial services

£8,500 is the average ISA balance

UK savers are committed to ISAs, according to a new Halifax survey. The average cash ISA balance across the UK is £8,505, or one-third of national average pre-tax annual earnings.

It’s not a uniform experience across the country, though: the research shows more than two-thirds of the regions with the highest balances are in southern England.

And older customers are more likely to have higher balances.

10,000 moans a day

Almost 10,000 complaints are being made to financial institutions every day, according to the Financial Services Authority. And it’s enquiries about PPI mis-selling that have mostly swelled the volume of discontent with top UK banks.

The statistics show that Barclays, Lloyds and Santander are the country’s most-complained-about banks. Barclays and Lloyds point out that the number of complaints actually fell, if those generated purely by the High Court ruling on PPI mis-selling are taken out of the reckoning.

CEO of Charter UK, PAUL CLARK, says that banks now face a “perfect storm” comprising three elements – PPI mis-selling, regulatory changes to complaints handling and the FSA’s tougher stance on overall financial regulation.

The better news for Santander in the figures was that it performed better than its competitors in response times. The Spanish group deals with 98 per cent of cases within eight weeks. Its nearest rival, HSBC, managed to deal with 90 per cent.

A benchmark to “keep it simple”

A government-backed steering group is to investigate how to develop simpler financial products. Treasury Financial Secretary MARK HOBAN MP will present a report next year on how to structure and market products that can be easily understood by consumers.

The steering group is chaired by CAROL SERGEANT, former Chief Risk Officer at Lloyds Banking Group. A founding member of the Chartered Banker Professional Standards Board, she comments: “Simple, easy to understand products need to be a viable commercial proposition for the industry, while offering consumers a straightforward benchmark that gives them the confidence to make good decisions in an often bewilderingly complicated marketplace.”

For the body to be effective, she adds, it needs the “involvement of consumer groups, financial regulators and the Money Advice Service, as well as the savings, investment and protection industries”.

SME lending is “worst in Europe”

UK small businesses are being disproportionately refused loans by banks. The rate of rejection quadrupled between 2007 and 2010 and now stands around 20 per cent.

The latest bleak figures from the Office of National Statistics and Eurostat show that the proportion of small and medium-sized businesses having their funding requests fully met fell by almost a quarter in the UK, compared with around one-tenth in France and Germany.

Young, fast-growing companies are the hardest hit. JOHN WALKER, Chairman of the Federation of Small Businesses, says: “It’s these businesses that are more likely to recruit rapidly and need finance to ensure a sustainable recovery.” The study appears to contradict the banks’ argument that a lack of demand is behind declining lending figures.

Wunderbar! A £48bn error

Germany finds itself £48bn richer after the discovery of an “accounting error” at Hypo Real Estate (HRE), the troubled mortgage lender it nationalised in 2009.

As a result, the country now expects its ratio of debt to GDP to be 81.1 per cent for 2011, 2.6 percentage points lower than previously forecast, says its Finance Ministry.

The €55.5bn miscalculation was at the HRE “bad bank”, FMS Wertmanagement. It will contribute about €161bn to Germany’s debt this year, compared with €216.5bn in 2010.

The error was “apparently due to sums incorrectly entered twice”, confesses a Ministry spokesman and the reason “still needs to be clarified”. The opposition Social Democrats (SPD) expresses Teutonic astonishment: “This is not a sum that the Swabian housewife hides in a biscuit tin and forgets,” says Parliamentary Leader THOMAS OPPERMANN. “To overlook such a sum is completely irresponsible.”

Just what “incentives”, Governor?

Governor of the Bank of England, SIR MERVYN KING, suggests that banks should be given a financial incentive to lend to small businesses. He tells a committee of MPs: “Fiscal incentives can persuade banks to lend to SMEs, or use of direct ownership of the biggest lenders. Those are the obvious instruments to use.”

He admits that the decision to spend £75bn on a new round of quantitative easing might be insufficient to encourage new lending. His idea that banks which have already received substantial taxpayer support should be incentivised to lend drew anger among some MPs.

ANGELA KNIGHT, Chief Executive of the British Bankers’ Association, says she’s unsure about the logic behind the idea: “What this doesn’t do is make a bad lending prospect into a good lending prospect.”

15 miles – in 175 years

Airdrie Savings Bank has opened its first ever branch outside Lanarkshire. The UK’s last independent bank broke a 175-year tradition to set up shop in Falkirk, 15 miles from Airdrie. The branch was opened by long-time supporter and Stagecoach supremo Sir BRIAN SOUTER and bank president BOB BOYLE.

“Today marks an important milestone in Airdrie Savings Bank’s history,” comments Mr Boyle. “There’s clear evidence of a wider demand for our approach, which is why we have now taken the decision to expand.”

Airdrie’s traditional style of banking, with a personal approach and focus on customer service and integrity, has drawn wide admiration. Mr Souter was last year among a group of high-profile Scottish business figures to deposit large sums in the bank to support its growth.

€15bn: Santander's shortfall

The European Banking Authority says that Santander faces a capital shortfall of €15bn.

Although the Spanish bank has enjoyed substantial growth internationally, its exposure to a troubled banking system and national economy in its home country is a constant concern.

Santander says it will be able to fill the hole identified by the Authority without having to go to the markets to raise money.

It calculates the shortfall would be €6.5bn if a convertible bond programme was included in its core capital.

£350m: for HSBC house buyers

HSBC is to make more loans available to first time house buyers. It is setting aside £350m to mortgage consumers who can put down a 15 per cent deposit (or have equivalent equity). At least £250m will be ringfenced for first-time buyers.

HSBC is also offering customers more competitive rates with small deposits. The bank says it views competitive rates as a key factor in growing the amount of lending to first-time buyers. PETER DOCKAR, Head of Mortgages, says this “shows HSBCs commitment to continuing to help people get on the housing ladder”.

At the end of the phone

The Bank Workers Charity, the new brand name for The Bankers Benevolent Fund, which supports current and former bank workers and their families, has launched a free, online interactive stress management tool to help people in banking to understand stress.

If you are feeling under pressure in the workplace, visit www.bwcharity.org.uk/services/beatingstress or telephone the helpline on 0800 0234 834 for more information.

FALLING: Card & online fraud
RISING: Cheque & online losses

Card fraud and online banking losses fell during the first half of 2011, according to Financial Fraud Action UK. Its figures suggest that the tightened security around online banking is having a positive effect. Cheque and phone banking fraud losses, on the other hand, rose over the same period.

But WILLIAM BEER, a director of PwC’s Information and Cyber Security practice, cautions against complacency: “It’s important to note that cyber crime is global, as are many of the banks that criminals target, so figures based solely on UK fraud might not tell the whole story.”

He also notes the price customers pay, with two-factor authentication becoming commonplace. “While this has lessened the risk of fraud, it has introduced an element of inflexibility into the system and should not be seen as a silver bullet.”

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