Barclays Bank Error In Your Favour - Collect £100M

I see that Barclays is fond of playing Monopoly, and has managed to create a bank error (for once in its customers' favour) that will entail a refund to affected customers (estimated at being around 300,000) of around £100M.

Barclays customers are to receive compensation because it miscalculated the interest owed on personal loans, the errors date back to October 2008.

Other divisions (Barclaycard, Barclays Wealth and Barclays Corporate) are now undertaking a review to see if customers were short-changed by the errors ("technical documentary errors").

Barclays will write to customers in the coming weeks. Barclays is quoted by the Telegraph saying that said it had "identified certain issues with the information contained in historic statements and arrears notices relating to consumer loan accounts. It is therefore implementing a plan to return interest incorrectly charged to customers".

A spokesman for the bank said:
"Barclays has proactively reviewed information it has historically sent to its customers relating to interest charges, where we have found technical documentary errors. As a result Barclays has identified certain issues with the information contained in some statements and arrears notices relating to consumer loan accounts. 

Due to these notification errors, interest was not due on certain accounts during the period that Barclays made this mistake, and whilst no one has been mis-sold to, customers are entitled to have their interest payments returned. No customer will pay more than they were ever contractually expected to. 

Barclays has notified the Office of Fair Trading (OFT), which is responsible for consumer credit issues, and is implementing a plan to return interest payments to customers as swiftly and efficiently as possible. Barclays is undertaking a review of all its businesses where similar issues could arise to assess any related issues. 

Any affected customer will be contacted by Barclays and customers do not need to take any action."
To add to Barclays shame, campaign group Move Your Money said that Barclays was the lowest scoring financial institution out of 70 assessed, scoring four out of 100 possible points for honesty and customer service.

Well done Barclays!

The TSB Goes From Strength To Strength

Following last week's website crash on its relaunch, the TSB has yet again managed to drop the ball; this time by mis-spelling Ashtead on a billboard advert aimed at the residents of Ashtead.

As per getSURREY:
"‘Welcome back to local banking’ was the message displayed to commuters on a TSB advertising board erected at Ashtead railway station this week.

But something rather important to local people got lost in translation - the spelling of the village they live in.

Now TSB bosses will be hoping that villagers can forgive their 'Hello Ashstead' howler.

A spokesman said on Thursday: 
“We apologise to local residents for the incorrect spelling.

"We are looking to rectify the poster as soon as possible.”

The company later tweeted an apology for the mistake."

The Interminable Rise of Greek Youth Unemployment

In May Greek youth unemployment was almsot 65%, in June it showed a slight "improevment" falling to 58.8%.

However, when compared to previous years the level of youth unemployment has worsened (as per Efthimia Efthimiou):

- June 2012 it was 54.8%
- June 2011 it was 44.4%
- June 2010 it was 31.3%
- June 2009 it was 23.2%
- June 2008 it was 20%

Levels of unemployment such as this are normally associated with third world countries in the midst of a civil war, or the equivalent. Yet Greece is, allegedly, a first world country and is meant to be an "equal" member of a powerful and prosperous economic block (ie the Eurozone).

The reality is that Greece is not treated as an equal, it should never have joined or been allowed to join the Eurozone and the prosperity within the Eurozone is not evenly spread but confined to the wealthy Northern economies.

As such it is clear that as an experiment the Eurozone is destined to fail, indeed the world will be a better place without it. However, with levels of unemployment such as this in Greece the real danger is that of a plague of dictatorships and civil unrest spreading country by country in the Southern members of the Eurozone.

In order to survive as a democracy and civilised society Greece needs to exit the Eurozone now, others such as Cyprus need also to consider their positions. 

The Greek Problem - Two More Bailouts Needed

European Central Bank Governing Council member, Luc Coene, is quoted by Reuters:
"It's clear that we are not yet at the end of the Greek problem. 

We will need to make further efforts, certainly once, perhaps twice more. 

We will see how the situation develops."
My advice to Greece stands, leave the Eurozone and devalue your currency.

Unemployment Falls as Estate Agents Hire Staff

As I have noted before, the British economy is driven by the property market and people's confidence (usually misplaced, given that property prices are relative) that an increase in house prices is an increase in personal liquid wealth.

Thus it should come as no surprise to see that today's announcement that unemployment dropped to 7.7%, from 7.8% in the three months to April, is largely due to an upturn in confidence in the property market.

Overall 80,000 jobs were created over the period, significantly above the predictions by "experts" and economists of an increase of 55,000. However, accounting for a large part of this 80,000 increase was a rise in the number of "real estate" jobs (on the back of a surge in confidence in the property market) of 50,000.

NB: "Real estate" jobs are in the main estate agents.

Wheatley Lambasts Outrageous PPI Mis-selling

Martin Wheatley, the CEO of the Financial Conduct Authority (FCA), is currently appearing before the Treasury Select Committee. He is less than impressed with the fallout from the PPI mis-selling scandal and the way that the banks are handling complaints.

Currently the FOS is upholding 90% of PPI mis-selling cases referred to it after they had been rejected by the banks.

Wheatley says it is "absolutely not acceptable" and that it is "outrageous" that the number upheld by the FOS is so high. He stated that the FCA has been looking into how banks handle complaints, as per the Telegraph:
"We have taken action and we will take more action and we will continue to look at how banks handle complaints. 

We've got two large investigations underway and have two cases where we have issued strong fines."
Sadly PPI mis-selling is but one of many areas where Britain's financial services industry mired itself in its own shit.

TSB Website Crashes

The newly launched TSB bank (split for Lloyds) has had a less than stellar first day, as its website has crashed.

Hardly a good augury for the future!

Fred The Shred and The Round Topped Filing Cabinets

The Telegraph reports that Fred Goodwin, erstwhile CEO of RBS, was so obsessed with tidiness and so irritated with piles of paper on filing cabinets that he ordered thousands of custom-made round-topped storage units to be rolled out across the bank.

A senior manager told Iain Martin, the author of Making it Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy being published next week.
Somewhere in a warehouse are thousands of old flat-top RBS filing cabinets that were not Fred-compliant.” 
In pre RBS days as chief executive of Clydesdale Bank, Goodwin apparently interrupted a meeting to take a call from his mother who had seen a cigarette butt left on the steps of the bank’s headquarters in Glasgow. Goodwin immediately arranged to have the butt removed.

Sadly this obsessive attention to detail didn't manifest itself in the more "mundane" activities of the bank such as credit, risk and how much is lent and to whom.

Greece Wants To Renegotiate Bailout Terms

Yannis Stournaras, the Greek finance minister, told German newspaper Handelsblatt on Monday that Greece may seek to ease its debt burden by renegotiating its bailout terms.

The renegotiation could involve lower interest payments and more time to repay 240bn euros in loans.

The BBC reports that on Sunday he admitted that Greece may face a hole in its finances of up to 10bn euros.

As I have noted before, the only real solution for Greece's financial and social woes are for it to leave the Eurozone and devalue its currency.

Banks Embroiled In Another Mis-selling Scandal

As loyal readers know, I have on numerous occasions noted that the financial services industry in the UK has tarnished its image because of its greed and corruption, and seems intent on bringing about its own self destruction.

Today we see yet another example wherein its greed has been exposed because of yet another mis-selling scandal.

This time the mis-selling relates to card protection and identity theft insurance products by CPP Group. The BBC reports that UK banks have agreed to set up a £1.3BN fund to compensate the victims.

The Financial Conduct Authority (FCA) said that customers had been "given misleading and unclear information about the policies".

CPP Group and 13 banks and credit card firms will pay for the compensation.

Some seven million customers could now expect to receive letters from CPP from 29 August 2013, explaining how to claim compensation. Victims will receive 8% interest on the amounts being reimbursed.

During the period of mis-selling between January 2005 and March 2011, CPP sold 4.4 million policies and generated £354M in gross profit. A further 18.7 million policies were renewed during the same period, generating an income of £656M.

Many customers were put in contact with CPP when they rang a number on their new bank card in order to activate it. Many thought they were talking to their bank, but they were in fact being put in touch with a salesperson from CPP.

CPP then used the opportunity of the call to offer card protection insurance. If the customer bought the product, the bank got a commission.

CPP Group sold a card protection product costing about £30 a year, that was designed to cover losses if a card was lost or stolen. It said customers would benefit from up to £100,000 of insurance cover, but customers were already covered by their banks. Generally, cardholders are not liable for unauthorised card payments on lost or stolen credit and debit cards; ie the product was unnecessary.

Needless to say we can expect to see the "ambulance chasing" financial compensation firms jumping on this bandwagon and offering to reclaim victims' money back in exchange for a percentage; which of course is completely unnecessary,as the victims can reclaim the money themselves.

Greece Needs Another Aid Programme

According to the Twitterverse, German Finance Minister Wolfgang Schaeuble has said that Greece will need another aid programme.

This should come as no surprise, given that the Bundesbank said the self same thing the other week.

Banks Play The Old Switcheroo

Banks and building societies are begrudgingly upping one very modest aspect of their customer "service"; namely that of guaranteeing to switch customers' bank accounts and direct debits (if requested) within seven working days as from September 16.

The Telegraph reports that 33 banks and building societies have signed up to the agreement, which will cut the length of time it takes to move accounts from up to 30 working days to seven working days.

Customers will be refunded interest and charges if anything goes wrong.

Whilst banks are offering cash incentives to people to switch their accounts (usually £100-£125) there is of course a sting in the tail; customers have to shut down their old current account if they choose to avail themselves of this guarantee (customers are entitled to opt out of it and manually change their accounts and payments).

As to whether this new guarantee improves the level of customer service wrt bank charges, products, rates etc remains to be seen; given that the banks operate in their own interests, rather than in the interests of their customers, any dramatic improvements in customer service are unlikely to see for quite some time if at all.

Eurozone Out Of Recession?

The media and Europhiles are hugely excited at the headlines today that proclaim that the eurozone is out of recession.

As per the BBC, the eurozone has emerged from recession after a record 18 months of economic contraction.

GDP grew by 0.3% in the second quarter of 2013, slightly ahead of forecasts. Germany and France dragged the eurozone out of the recession with growth of 0.7% and 0.5% respectively. However, Spain experienced contraction of 0.1% on the quarter, and Italy and the Netherlands both saw output drop by 0.2%.

The eurozone cannot survive in its present form where the rich Northern countries prosper whilst the poor Southern ones collapse, just ask the good people of Greece (with close to 65% youth unemployment) if they feel that they are now out of the recession.

Pre Election House Price Bubble On Its Way

According to the Office for National Statistics (ONS) House prices rose 0.4% in June compared to the previous month, the year on year rise now stands at 3.1% compared with 2.9% in May.

This increase outstrips price inflation (CPI) which was 2.9% in June.

Howard Archer, chief UK economist at IHS Global Insight, is quoted in the Telegraph:
"We now expect house prices to rise by at least 3pc over the rest of 2013 and to then increase by 7pc in 2014."
House price bubbles of course will benefit the government in the run up to the election, as people (rather foolishly, given that the rise is relative) feel better off when the house that they live in rises in value.

Greece Imploding

Greece is continuing on its downward spiral to financial implosion.

To add to the woes of the good people of Greece, on top of last week's truly shocking youth unemployment statistics (close to 65%), Reuters reports that Greece's economy shrank at annual pace of 4.6% in the second quarter, contributing to a slump of more than 20% in real terms since 2008.

Ironically, in the delusional world of economists, these figures were slightly better than the 5% contraction forecast.

Delusions aside, Der Spiegel has blown the whole charade of bailing out the Greek economy wide open. It quoted an internal document prepared by the Bundesbank as saying that Europe "will certainly agree a new aid programme for Greece" by early next year at the latest.

The Bundesbank also described the risks associated with the existing aid package for Greece as "extremely high", and said the approval last month of a 5.8 billion euro aid instalment to Athens had been "politically motivated".

As I have noted many times before, in order to survive as a democracy and civilised society Greece needs to exit the Eurozone now; others such as Cyprus need also to consider their positions. 

Greek Youth Unemployment Close to 65%

Youth unemployment in Greece has risen to a shocking 64.9% in May.

Levels of unemployment such as this are normally associated with third world countries in the midst of a civil war, or the equivalent. Yet Greece is, allegedly, a first world country and is meant to be an "equal" member of a powerful and prosperous economic block (ie the Eurozone).

The reality is that Greece is not treated as an equal, it should never have joined or been allowed to join the Eurozone and the prosperity within the Eurozone is not evenly spread but confined to the wealthy Northern economies.

As such it is clear that as an experiment the Eurozone is destined to fail, indeed the world will be a better place without it. However, with levels of unemployment such as this in Greece the real danger is that of a plague of dictatorships and civil unrest spreading country by country in the Southern members of the Eurozone.

In order to survive as a democracy and civilised society Greece needs to exit the Eurozone now, others such as Cyprus need also to consider their positions.

UK Economy Heads Towards Escape Velocity

Following last week's jump in the UK's construction PMI, there is further good economic news.

The UK services sector grew at its fastest pace in more than six years in July. The Markit/CIPS services purchasing managers' index (PMI) rose to 60.2 in July from 56.9 in June, its highest level since December 2006. This is a larger gain than forecast by any of the economists polled by Reuters.

Paul Smith, senior economist at Markit is quoted by Reuters:
"Although an early call on one month's data, the forward-looking elements from the survey point to a further strengthening of GDP in Q3 as the UK heads towards 'escape velocity' and self-sustaining economic expansion."
The PMI survey showed a continued increase in services employment. However, the increase in demand is also causing firms to increase prices; ie people's incomes will remain "under pressure".

UK Construction Jumps

UK construction activity rose in July to its highest level since June 2010.

Reuters reports that the Markit/CIPS construction PMI rose to 57.0 July, up from 51.0 in June. The rise is mainly on the back of an increase in residential construction which has spurred an increase in confidence of purchasing managers.

Whilst the increase in residential construction is hardly surprising, given the increased stimuli to the sector offered by the Chancellor, the size of the increase in PMI is above expectations and as such is very welcome.

Tim Moore, senior economist at Markit said:
"July's survey highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years."
Like it or not, the UK economy's bedrock is the property sector; by stimulating that sector the Chancellor has in effect stimulated the economy.

The question is, will this stimulation create an inflationary asset bubble?

Lloyds Back In Profit

Lloyds Banking Group has returned to profit, and has made £2.1bn in the six months to the end of June. This compares very favourably with the loss of £456m for the same period last year.

The BBC reports that the bank stated that it had made substantial progress on strengthening its balance sheet, although "further work remains to be done".

Lloyds is 39% owned by the UK government (ie the taxpayer) and, based on the good results and the fact that bank said it would be talking to regulators in the coming months about resuming paying a dividend on its shares, people are now betting that the publicly held shares will be sold off (ie the bank will be privatised) and that the announcement of the privatisation will be made within the coming days.

The Treasury have just stated that there is no set target price or timetable for privatisation. However, it also stated (as per Reuters):
"..we have said that we are now actively considering options for sales of the taxpayer's shares in Lloyds."
Shares in Lloyds are up around 4% on the day.

Barclays £12.8BN Hole

Barclays has gone cap in hand to its shareholders today for £5.8BN via a rights issue, in order to help it plug a £12.8BN capital shortfall arising from the new Prudential Regulation Authority (PRA) imposed safety buffer.

The Telegraph reports that rights issue will allow existing investors to buy one new share for every four they currently own at a price of 185p, a discount of 40% to they bank's closing share price yesterday. 

Barclays will also issue £2BN of bonds that are turned into shares or wiped out if the bank gets into trouble.

Additionally in its six months results for the first half of this year, Barclays has set aside £1.35BN against further PPI claims, bringing its total compensation fund to just under £4BN, and a further £650M for interest rate swap redress, increasing its provision to £1.5BN.

Barclays chief executive Antony Jenkins is quoted by the BBC, in a dig at the PRA, warns that plugging the hole will have a negative impact on the economy:
"It means Barclays will provide fewer financial transactions to big companies, life insurers and pension funds, inter alia, to help those giant institutions reduce their risks. And to be clear that will represent a tightening of credit for those customers, so there may be a negative economic impact."
Barclays share price is currently down 7% on the day.

Ever Rising Energy Bills

Ed Davey, the Energy Secretary, has pleaded with energy companies to explain their profits ie to be more "transparent".

Ofgem has also been criticised in a report by MPs on the Energy Committee, for failing to do enough to tackle profiteering by energy companies.

That's all very well, up to a point. However, the MPs seem to forget that taxes and green energy surcharges also add to the financial burdens of the hapless energy consumers.

UK Economy Grows By 0.6%

The UK economy grew by 0.6% in the second quarter compared to the first three months of the year, according to the Office for National Statistics (ONS).

George Osborne tweeted the following reaction:
"GDP stats better than forecast.Britain's holding its nerve, we're sticking to our plan, the economy's on the mend.But still a long way to go"
However, as I always caution, when it comes to ONS statistics never trust them. They are always out of date and subject to revision.

In the meantime whilst people crack open a can of lager to celebrate the modest signs of economic recovery in the UK, let us not forget that China frets when growth bumps along at a "mere" 7%!

Local Lending Data For 10,000 Postcodes

The government have announced that the UK’s biggest lenders will reveal how much they lend at a local level across 10,000 postcodes.

The new data, published for the first time by the end of this year, will allow businesses and the public to see how the banking and building society sectors are serving the wider economy, and in what areas of the UK there less lending.

The data will be published by the British Bankers’ Association (BBA) and the Council of Mortgage Lenders on a quarterly basis and show the outstanding stock of lending that has been committed to customers across three categories:
  • loans and overdrafts to SMEs
  • mortgages
  • unsecured personal loans (excluding credit cards)
Each postcode will be broken down by category to show the exact lending being made to each.

All very well maybe, but why delay it until the end of the year?

RBS Fined £5.6M

RBS has been fined £5.6M by the Financial Conduct Authority (FCA) for "incorrectly reporting transactions they made in wholesale markets".

Seemingly, between 2007 and 2013, RBS either didn't report or incorrectly reported approximately 45 million transactions!

China's 7% Bottom Line

China's Premier, Li Keqiang, has underpinned global markets by stating that China’s “bottom line” for GDP growth is 7%, and the nation can’t let growth go below that.

Seven percent is not too shabby at all!

I would note that had a similar statement been issued by the ECB, wrt there being a bottom line for growth for the Eurozone (albeit with a bottom line of growth of far less than 7%), no one would have believed it!

Chinese Growth Falls To 7.5%

As expected China's economic growth slowed to 7.5% in the second quarter of the year.

The Chinese statistics bureau said the slowdown was partially due to deliberate efforts for structural reform and that a slower pace of growth was preferable in the long term.

Sheng Laiyun, spokesman for the National Bureau of Statistics, is quoted by the Telegraph:
"Some measures, including the intensified property tightening campaign, new rules to curb misuse of public funds and the exit some previous stimulus policies, will inevitably have some impact on growth in the short term, but they will benefit our economy in the long run."
Were this any other country such a rate of growth would be considered to be excellent.

The reality is that exceptional levels of growth, such as this, cannot continue indefinitely. Given the size of China and its economy, growth in excess of 7% isn't too shabby at all.

One In 20 Households Rely On Payday Loans

The Telegraph reports that the Aviva Family Finances Report published today notes that one in 20 households is "relying" on payday loans to get by.

Two weeks ago the Office of Fair Trading referred the £2BN industry to the Competition Commission, after uncovering evidence of "widespread irresponsible lending".
Last week the Financial Conduct Authority warned that it was considering a total advertising ban on payday loan companies as one of the options when it takes over regulation of the sector next April.

Controls and increased regulation are all very well. However, if hard pressed families who are not well served by mainstream lenders are unable to raise loans from payday loan companies their only other resort will be loan sharks.

The Verdict on Greece

Last week I wrote that Greece had been given a three day deadline to reassure Europe and the International Monetary Fund that it could deliver on conditions attached to its international bailout in order to receive the next tranche of aid.

Unsurprisingly, post deadline, the EU and IMF have given Greece a less than ringing endorsement noting that the outlook for Greece's bailout programme remains uncertain.

Reuters quotes the Troika:
"While important progress continues to be made, policy implementation is behind in some areas.

The authorities have committed to take corrective actions to ensure deliver of the fiscal targets for 2013-14 and achieve primary balance this year.

The mission and the authorities agreed that the macroeconomic outlook remains broadly in line with programme projections, with prospects for a gradual return to growth in 2014. The outlook remains uncertain, however."
As I warned last week, those with money in Greek bank accounts would be advised to withdraw it now before the jackals pounce. 

Careless Talk Costs Dollars

The Australian Dollar plunged to a three year low following a "light hearted slip of the tongue" by Glenn Stevens the Governor of Australia's Reserve Bank.

His crime?

In a "Ratner" moment Mr Stevens said in a speech on Wednesday that the bank’s board “deliberated for a very long time” before leaving the cash rate steady at its monthly meeting on Tuesday.

This comment caused the dollar to drop to US90.37 cent, and prompted some bank economists to change their forecasts and predict an interest rate cut in August.

In a damage limitation exercise the Reserve Bank insisted that the comment was “light-hearted”, this in turn lifted the dollar and prompted banks to withdraw their revised forecasts.

The bank’s deputy governor, Philip Lowe, was quoted by the Telegraph saying that the financial markets and the media had “misinterpreted” the comments, which were not supposed to be taken seriously.
"They were meant to be a light-hearted remark after what, he [Mr Stevens] reports to me, was a very light-hearted introduction.

I can confirm for you that the board did deliberate for a very long time. I can also confirm for you that it always deliberates for a very long time.”
Professionals such as Mr Steven should know that financial markets do not posses a sense of humour, especially in the current febrile atmosphere!

Greece's Day of The Jackal Looms

Reuters reports that Greece has been given three days to reassure Europe and the International Monetary Fund it can deliver on conditions attached to its international bailout in order to receive the next tranche of aid.

Europe and the IMF are unhappy with the progress that Greece has made towards reforming its public sector and improving its tax collection.

In the event that Greece misses the deadline or its promises fail to assuage its "bankers", then as sure as eggs are eggs the "solution" that was foisted upon Cyprus (ie a raid on bank accounts) will be foisted upon Greece.

Those with money in Greek bank accounts would be advised to withdraw it now, before the jackals pounce. 

David Drumm Apologises

David Drumm, ex CEO of the now defunct Anglo Irish Bank, has apologised for the language used in a phone call released by the Irish Independent.

All sorted then!

Happy Canada Day

Mark Carney starts work today as Governor of the Bank of England, ironically it is also Canada Day!

No Double Dipper

As sure as eggs are eggs, the Office for National Statistics (ONS) has revised its figures yet again.

This time the revision brings some good news, it appears that Britain never had a double dip recession:
"GDP growth between Q4 2011 and Q1 2012 has been revised from a fall of 0.1% to flat, thereby removing the phenomenon of two consecutive quarters of negative growth."
As I have noted many times before it is extremely unwise to rely on figures provided by the ONS, they are always out of date and invariably wrong.