£100 billion needed to clear Lloyds debt

December 30, 2010 at 12:24 pm

Lloyds Banking Group, the bank created by the merger of Lloyds TSB and commercial lender HBOS as the credit crunch struck with aplomb, is seeking to refinance up to £100 billion of emergency government loans and guarantees that were sent its way to save it going under when the global financial meltdown hit the UK. The takeover of HBOS by Lloyds TSB was completed in early 2009 after initial talks began in September 2008 following a massive drop in HBOS’s share price.

With the government loans and guarantees received by Lloyds (thought to be in the region of £165 billion and used to keep it afloat and help to deal with the extremely damaging investments and loans that HBOS brought to the merger) due to expire during the first quarter of 2012, Lloyds remain confident that they can complete their refinancing plan prior to that date despite further bad news that the bank is expecting to take a major hit as a result of Ireland’s current economic woes.

However, further significant doubts have been raised over the ability of the banks to refinance successfully. Moody’s, a global credit ratings agency, has revealed that, despite their best intentions to improve their funding profiles, a number of British banks are going to find it extremely difficult to pay back the billions of pounds worth of bonds and loans over the next couple of years. This is a particularly worrying situation since the recession has understandably made international debt investors extremely reluctant to even go so far as to enter into negotiations concerning potential lending.

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Myners calls for greater competition in banking sector

December 27, 2010 at 12:21 pm

Lord Myners, the former City minister, has urged the government to focus upon introducing a greater level of competition between the top banks in the UK, with the break-up of Royal Bank of Scotland (RBS) and Lloyds top on his banking wish list.

According to controversial comments reported in the Financial Times from Lord Myners, who was a member of former Prime Minister Gordon Brown’s old economic “war cabinet”, the British public lose out as a result of the banking industry’s total domination by just a few major banks. The lack of competition at the top level of the financial industry means that the wider economy suffers to a far more severe extent when one of the top banks fails than would be the case if the UK had at its disposal a far wider range of banks.

With Lord Myners still a formidable character in the world of banking, it seems likely that those in the financial industry will be quaking in their boots as they consider his request to the Commission on Banking for there to be a break-up of both RBS and Lloyds. Lloyds has been particularly dominant since its takeover of Halifax Bank of Scotland following the threat of collapse to that particular financial giant.

Certain corners of the industry have been quick to criticise the comments, deemed by many to be pure hypocrisy, made by Lord Myners, who was a staunch supporter of Labour’s defence of the monolithic superbanks that were saved by the taxpayer.

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FSA reveals potential penalty for failed bank bosses

December 24, 2010 at 2:49 pm

The ferocity of the anger directed towards British bankers since the start of the recession has reached, at times, astronomical levels, with a few of the top banks’ top bosses bearing the brunt as Brits struggle to cope with the aftermath of the global crash. Now, though, officials at the Financial Services Authority (FSA) have joined in with the calls from the public for bosses at Britain’s banks never again to repeat the mistakes that have proved so devastating for so long now.

The head of the FSA, Lord Turner, has stated that those top bankers who have made crippling errors and decided to ignore entirely the element of risk when performing their day jobs should be financially punished in order to protect the interests of the innocent British taxpayer.

Lord Turner stated that senior executives might be forced to abide by strict rules that would prevent them from being able to seek employment in similarly important, top roles at banks in the future if they take risks deemed unnecessary or excessive. Rules currently in operation in the USA, which demand bankers to surrender two years of their salary if they are found guilty of causing the collapse of a bank, could also be introduced into the UK.

Whilst Lord Turner’s remarks have been met with criticism from some quarters, with one lawyer describing the concepts as “misconceived”, it seems that those left severely out of pocket by the recession may well be in agreement with the thought of introducing harsher penalties.

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Debit cards overtake cash

December 16, 2010 at 2:44 pm

Debit cards are now the most popular method of payment for consumers in the UK, overtaking cash purchases for the first time ever, according to new data.

Recent figures from the Payments Council have shown that spending on debit cards reached a record £272 billion during last year’s August Bank Holiday. Cash payments during the same period amounted to £269 billion. And an extra 1.6 million transactions were made on debit cards every day during the summer compared to the previous year.

Throughout the third quarter of 2010, the amount of withdrawals from cash machines also fell by 1.5% compared to the same time frame in 2009, indicating a drop of nearly 5%.

Sandra Quinn, director of communications at the Payments Council said that “cash was too cumbersome for many consumers these days” and a card payment was preferred for “anything more than the smallest transaction”.

She added that today’s consumer expected debit cards to be accepted everywhere “in pubs and clubs, at the corner shop, on-line and on the high street”.

Credit cards used to be the only convenient way to pay as an alternative to cash and cheques “but now people have far more options”, she said.

The Payments Council said that spending on credit cards had seen little change in recent years and was up just 2.2% last summer. The number of cardholders had also dropped from 31.7 million to 30 million in the last five years.

There were 104 million fewer cheques written over the last year. Cheque usage is expected to virtually halve by 2015 if the current pace of decline continues, said the Payments Council.

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British savers lose £12 billion a year

December 15, 2010 at 10:28 am

Savers in Britain are losing an estimated £12 billion every year simply because they are keeping their savings in bank accounts with very low interest rates rather than moving them to accounts paying higher rates.

The news was revealed by Which?, after a survey was conducted into the nation’s saving habits.

£12 billion in interest a year is equal to £322 per saver being lost in interest. If only the nation’s savers were putting their money into higher-rate savings accounts then they would be this much better off every year.

Which? discovered a bleak picture when it came to savings rates across the UK. It found out that of the 1,200 savings accounts in the UK, nearly half pay just 0.5% or under for a balance of up to £5,000. On top of that, it also found that one in four accounts pays 0.1% or less.

The 0.5% base rate is partly to blame, but Which? claims that banks should also be doing more to inform their customers of the different rates on offer to allow savers to see quickly how much they could be making in interest if they switched their money. Some of the instant access top rates are 3%, with 4.5% interest rates possible for long-term savers.

Of all the banks in the UK, Santander performed the worst for low rates, with 29 out of its 53 accounts paying 0.1% or under. Barclays had the highest proportion of low-interest accounts, with two thirds only paying 0.1% or under.

The advice is, as always, to shop around and find the best rates that you possibly can if you want to make your savings go further.

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Government scraps state-backed Post Office Bank

December 8, 2010 at 2:47 pm

Plans to turn the Post Office into a state-backed bank have been scrapped by the government in a move that has left the Communication Workers Union, among many others, furious.

Ministers revealed that the plan to set up a state-backed Post Office ‘People’s Bank’ would cost the government far too much money at a time during which cuts are being made far and wide. With the plan also considered by government officials to be too time consuming, it seems that the decision to shelve the plans is final.

Whilst the National Pensioners’ Convention have announced their belief that the decision from the government is “extremely short-sighted” and one which could put the “future of the post office network in jeopardy”, the government clearly think that time and money is better spent modernising and maintaining the network as a whole whilst extending the banking facility at the Post Office. RBS and NatWest customers will, as a result of this, be able to use the existing network of post offices for banking, with nearly 80% of current accounts set to become accessible there, whilst a funding package worth £1.34 billion over the next four years should allow around 4,000 of the largest post offices in the country to be updated in order to improve the current level of service.

Whether or not the coalition government ends up living to regret the decision to reject the state-backed bank plans a few years down the line remains to be seen but it seems a safe bet that the criticism will continue to be directed their way over the coming weeks.

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Profits rise for Santander

December 6, 2010 at 2:20 pm

Santander has revealed that its UK profits are up a fifth for the third quarter of the year. However, it was not all good news for the banking giant as it also warned that its full-year results are not likely to be so good.

Santander has made an impact on UK high streets over recent months with the purchase of big names including Abbey, Alliance & Leicester and Bradford & Bingley. Now it has reported pre-tax trading profits up 20% to £619 million for the three months to the end of September.

It also revealed that its profits were up 13% to £1.3 billion for the first nine months of the year, meaning that it made more money in the UK than in Spain.

The warnings about the full-year results come as the larger Santander group expects to see profits lower than expected due to new Spanish rules that have come into force. These rules on bad debts were brought in by the Bank of Spain, and forced the group to write off £413 million.

The UK arm of Santander saw a fall in its UK retail deposits during the third quarter, to £700 million compared to £4 billion last year. The reason for this was due to a lot more competition for savings from the other banks. Its net mortgage lending was also down in the third quarter to £1.8 billion compared to £3.1 billion last year.

However, Santander revealed that it had opened 786,000 new accounts during the first nine months of the year, which means it is likely to reach one million new accounts for the second year running.

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