Banks should warn exposed savers

It's not often that the majority of MPs say banks should be forced to raise interest rates
But in this case they mean raising interest in a protection scheme for all savers who use UK financial institutions.
Such is the widespread ignorance of the scheme, that banks and building societies are being urged to tell investors when they exceed its guaranteed limits.
All this is according to the Financial Services Compensation Scheme (FSCS), the UK's savings safety net.
This last-resort compensation fund protects a maximum £85,000 for single account savers and £170,000 for joint accounts if a bank goes bust.
This is funded by an industry levy.
As many as 81 per cent of MPs surveyed in an FSCS poll say financial institutions should make it clear to savers when their deposits exceed the £85,000 compensation limit that anything above this amount is not protected.
More than three-quarters (76 per cent) of customers polled agree, said the FSCS.
The body itself wants to see banks and building societies doing more to raise awareness about compensation limits in their everyday dealings with customers, including advertising.
The FSCS previously acknowledged that its own promotional efforts have not sufficiently raised the public grasp of the scheme.
Its last study in December found that just over one in 10 customers (12 per cent) know precisely how much of their money would be safeguarded if their bank went under.
Such lack of awareness has continued, despite new awareness rules coming into force last August.
They ordered that that banks, building societies and credit unions must prominently display stickers or posters publicising compensation rates.
The savings safety net's latest study also discovered that more than three in four MPs think that banks and building societies should include details about the FSCS in their advertising.
Four-fifths say that raising awareness of the body would enhance consumer confidence and financial stability.
Researchers surveyed more than 150 MPs and 1,000 consumers.
The FSCS has assisted more than 4.5 million people and paid out more than £26 billion in the past 12 years.
The scheme guarantees savings held with UK banks and subsidiaries of foreign banks which operate in the UK.
It does not, however, cover deposits stored with UK branches of European banks, which are covered by the relevant compensation scheme in the country where the bank has its head office.
The recent Cyprus economic collapse highlighted the subject of savings protection.
It was announced last week that about 15,000 savers in the UK branch of stricken Cypriot bank Laiki would have their savings switched to Bank of Cyprus UK.
This bank works as a fully-fledged independent bank in this country.
This means that its deposits are covered by the FSCS.
Mark Neale, FSCS chief executive, said it is too late for customers to learn about FSCS when a run on a bank begins.
He thinks banking companies can and should do more.
Mr Neale said that savings compensation awareness is higher in the United States as financial institutions customarily include such details in their advertising.

Banks and insurers urged to create 'simple' products

The government has asked finance companies to develop less complicated products to encourage savers. Photograph: Philip Brittan/Alamy

The government is urging financial services companies to offer a set of simple financial products to customers to encourage more people to save.

A report commissioned by the Treasury has outlined four accounts and policies that should be offered and standards they should meet before being put on the market. The products will be reviewed by the British Standards Institution and those that qualify will be given a kitemark showing they meet the standards on simplicity.

A steering committee led by Carol Sergeant, a former chief risk officer at Lloyds Banking Group, was asked to look at the implementation of simple products after concerns consumers were being deterred from saving by the complexity of products on offer.

It spoke to groups representing banks, building societies and insurers, and has outlined products which the industry has indicated it will be willing to offer. The Treasury will review the marketplace in 12 months to see whether providers are making the accounts available.

The first set of simple financial products will be an easy access savings account, a 30-day notice savings account, a regular savings account, and a fixed-term life insurance product, typically the type taken out with a mortgage.

Under the proposals, the savings would have low minimum investment levels – just £1 for the instant access and notice accounts – and there would be limited restrictions on withdrawals and access.

Information on the products will be "straightforward and consistent" and the key terms and conditions will be the same for each product, making them easy to understand and compare.

The next product available should be a whole-of-life insurance policy, and the Association of British Insurers has been asked to look at how an income replacement policy could be added to the list.

Sergeant said: "We have known for a long time that being able to manage your finances effectively leads to increased well-being and a better quality of life, at every given level of income.

"I hope the simple financial products initiative will make it easier for people to understand and compare the key financial products they need and make good choices with confidence."

The economic secretary to the Treasury, Sajid Javid, said: "The challenge now is to ensure that the work that has gone into the Sergeant review is transformed into tangible changes for consumers, and I look forward to discussing progress made with the industry and consumer groups next year."

Richard Lloyd, executive director of consumer group Which?, welcomed the proposals. "Consumers should not have to tackle pages of terms and conditions and they should be told clearly what rates and charges apply, so they can shop around more easily and get a fair deal," he said. "We now look to the financial services industry to deliver on these proposals."

The head of the Building Societies Association, Adrian Coles, said his members had been pleased to take part in the review of the market but pointed out that there are other deterrents to saving.

"We understand that the current economic climate is challenging for savers and that squeezed household budgets coupled with lower interest rates are currently a disincentive to saving," he said. "Nevertheless, the report makes some helpful proposals."

Previous initiatives to simply financial products have fallen by the wayside. Sergeant said the lessons learned from past attempts had informed the report.

"It is clear that successful products need to be affordable for consumers as well as commercially viable; meet real consumer needs; be straightforward to understand, compare and manage ; and be supported by a wide group of key stakeholders," she said. "Over 50 organisations have been involved in putting today's recommendations forward, and we have the full support of consumer bodies for these products and the commitment of the banks and insurance companies to deliver them."

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Can stiff penalties control banks?

AppId is over the quota
AppId is over the quota
Number of fines imposed on banks has remained constant for a decade, but fines' value has grown faster than inflationSilva asks: Are U.S. regulators using financial penalties as a method of indirect regulations? And will it work? American regulators have unique views on how to run banking and have tried to influence global regulationsU.S. wants banks to assume Iranians are guilty until proven innocent, rest of the world wants the opposite, Silva writes Editor's note: Ralph Silva is a financial services specialist and managing director of Silva Research Network, with over 24 years of global experience mainly as an investment banking professional.

London (CNN) -- UBS to pay $1.5 billion over Libor manipulation, HSBC paid $1.92 billion for failing to stop money laundering, Standard Chartered paid $667 million, ING, $619 million, Credit Suisse, $536 million, ABN AMRO $500 million and the list goes on and on.

While the number of fines imposed on banks has remained constant over the past 10 years, the value of fines has grown considerably faster than inflation. One has to ask, therefore: Is this the new norm? Are U.S. regulators using financial penalties as a method of indirect regulations? And will it actually work?

American regulators have unique views about how to run a banking industry, views that often differ from their global counterparts. The latter, by and large, have a hands-off approach to an industry that is globally focused.

The U.S. has tried, on countless instances, to influence global regulations. But it has been to no avail. The financial services market outside the U.S. is bigger than the domestic market.

So, if Europe or Asia decides on its own path, the U.S. has very little power to stop it.

It's therefore not unreasonable that the U.S. regulators impose different oversight on foreign banks than domestic equivalents. This is likely the reason we've seen fines of considerably higher value imposed on non-U.S. banks for similar infractions.

Read more: Eurozone still has mountain to climb

Sure, some U.S. banks have seen fines in the hundreds of millions: Bank of America, JP Morgan, Wells Fargo come to mind. But the vast majority of U.S.-based fines are small. You would be forgiven for thinking this is discrimination. It's really indirect regulation.

If a U.S. bank breaks rules, it is relatively easy for U.S. regulators to march into their offices, take all the material they need for an investigation and then dictate policy for the bank.

In the case of a foreign operation, they can't do that. The U.S. authorities have no rights to material held in foreign offices. Further, once funds leave the U.S., they are often irretrievable without political help.

This is the reason why global financial services regulations are necessary and inevitable, although decades away.

By fining at the billion dollar level, banks wishing to operate within the U.S. will be encouraged to be far more carefully than domestic operations. This is exactly what the U.S. regulators want.

var currExpandable="expand113";if(typeof CNN.expandableMap==='object'){CNN.expandableMap.push(currExpandable);}var mObj={};mObj.type='video';mObj.contentId='';mObj.source='bestoftv/2012/12/20/pkg-boulden-ubs-libor-fine.cnn';mObj.videoSource='CNN';mObj.videoSourceUrl='';mObj.lgImage="http://i2.cdn.turner.com/cnn/dam/assets/121220124923-pkg-boulden-ubs-libor-fine-00001703-story-body.jpg";mObj.lgImageX=300;mObj.lgImageY=169;mObj.origImageX="214";mObj.origImageY="120";mObj.contentType='video';CNN.expElements.expand113Store=mObj;Banks find it difficult to operate in the U.S. because they often have to adhere to rules that are diametrically opposed to rules in their home countries.

var currExpandable="expand114";if(typeof CNN.expandableMap==='object'){CNN.expandableMap.push(currExpandable);}var mObj={};mObj.type='video';mObj.contentId='';mObj.source='bestoftv/2012/12/19/qmb-ubs-fine-bart-chilton.cnn';mObj.videoSource='CNN';mObj.videoSourceUrl='';mObj.lgImage="http://i2.cdn.turner.com/cnn/dam/assets/121219081632-qmb-ubs-fine-bart-chilton-00040207-story-body.jpg";mObj.lgImageX=300;mObj.lgImageY=169;mObj.origImageX="214";mObj.origImageY="120";mObj.contentType='video';CNN.expElements.expand114Store=mObj;Money laundering is a great example. The U.S. basically asks banks to assume Iranians and Iranian organizations are guilty until proven innocent, while the rest of the world wants banks to assume Iranians are innocent until proven guilty.

This means global banks have to operate an infrastructure for U.S. rules and a second infrastructure for the rules of other regulators. The costs are high and the risks are many -- and banks simply don't want to do it.

In the end, it's not going to work. The U.S. can fine HSBC or UBS all they want, these two banks are incredibly strong and can easily afford it.

But what about troubled banks, or ones like government-owned RBS? If they were to levy the same fines for these banks they could put them out of business.

If a bank of RBS's size went under, it could cause economic instability in its home country. The government would have to get involved. And fining them a lesser amount for the same infraction would not go down well with HSBC or UBS who would most certainly send a thousand lawyers to Washington to ask why they were discriminated against.

After all, you get a $100 fine for going 20 miles over the speed limit if driving a Ferrari or a Ford.

The opinions expressed in this commentary are solely those of Ralph Silva.

December 21, 2012 -- Updated 0252 GMT (1052 HKT) Some believe the world will end Friday, the last day of ancient Mayan calendar. Mayans, or at least those living in Merida, Mexico, don't buy it. If the world's about to end, what would be your last meal on Earth? Feast your eyes on the most popular choices.December 21, 2012 -- Updated 0627 GMT (1427 HKT) People in a tiny French village are hoping to profit from the end of the world predicted for later this month. Jim Bittermann reports. Bushmaster corporation: If you buy one of their semi-automatic rifles -- like the kind Adam Lanza used -- "Consider your Man Card reissued." December 20, 2012 -- Updated 2149 GMT (0549 HKT) The evolving face and story of Aesha, disfigured by the Taliban and featured on the Time magazine's August 2010 cover, has captivated the world.December 21, 2012 -- Updated 1051 GMT (1851 HKT) ITN's Alex Thomson gains rare access to accompany the Syrian army in Daraya.December 20, 2012 -- Updated 1218 GMT (2018 HKT) India's rape cases, one every 22 minutes, betray what's wrong with society where millions believe women invite trouble by being careless.December 20, 2012 -- Updated 0159 GMT (0959 HKT) If that office on Wall Street has been illusory, a Victoria Harbor view from Hong Kong's skyline may be the place to find yourself in a few years.December 21, 2012 -- Updated 1016 GMT (1816 HKT) CNN's Fred Pleitgen on the first museum exhibit on the biblical ruler of Judea.December 20, 2012 -- Updated 1116 GMT (1916 HKT) Sudanese government has been bombing and spreading terror in the South Kordofan state, surgically cleansing the land of the Nuba people. A gunman opened fire in a Connecticut elementary school on December 14, killing 26 people -- 20 of them children. Learn more about the victims.December 19, 2012 -- Updated 1549 GMT (2349 HKT) With a death-defying leap, a hot novel and the U.S. election -- 2012 has been an incredible year. Watch the highlights in CNN's video mash-up. 2012 is a big year in horse racing as 6 million people head to the track. The rise of celebrity horses Frankel and Black Caviar creates a buzz. Today's five most popular stories

View the original article here

Wall Street ends best week of year as aid for Spain's banks seen near

 
1 of 2. Floor governor Patrick King (L) announces the start of trading of Healthcare Trust of America, Inc. on the floor of the New York Stock Exchange June 6, 2012.
Credit: Reuters/Brendan McDermid  NEW YORK (Reuters) - Spain blinked. And Wall Street jumped. The U.S. stock market ended Friday's session with its best weekly gains of the year in a rally late in the day after sources told Reuters that Spain was expected to ask the euro zone on Saturday for money to bail out its troubled banks.
If the scenario unfolds as expected this weekend, Spain would become the fourth country to seek aid since Europe's debt crisis began. That could go a long way toward ending the uncertainty and worry that Spain's banking woes could prolong a downturn in the euro zone into recession and hurt the U.S. economy for the foreseeable future.
Five senior European Union and German officials said euro-zone deputy finance ministers would hold a conference call on Saturday morning to discuss Spain's request for help to recapitalize its banks. This was seen as an effort to stem the tide of worsening market turmoil.
"They're asking for the banks to be allowed to tap" the European Financial Stability Facility, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets.
"So I think that gives folks some hope, but most of these measures tend to be temporary boosts to investor psychology."
U.S. President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic U.S. recovery.
On Friday, the S&P financial index .GSPF rose 1.2 percent while the KBW bank index .BKX climbed 1.7 percent and shares of JPMorgan Chase & Co (JPM.N) advanced 2.7 percent to $33.68 - all adding to gains just ahead of the close.
The Dow Jones industrial average .DJI rose 93.24 points, or 0.75 percent, to end at 12,554.20. The Standard & Poor's 500 Index .SPX gained 10.67 points, or 0.81 percent, to 1,325.66. The Nasdaq Composite Index .IXIC climbed 27.40 points, or 0.97 percent, to close at 2,858.42.
For the week, the Dow advanced 3.6 percent, the S&P 500 rose 3.7 percent and the Nasdaq jumped about 4 percent - the best percentage weekly gains for all three indexes since December.
As the euro zone's fiscal troubles grew worse in recent weeks, even Ronald McDonald felt the pinch.
Underscoring the impact of Europe's debt crisis, McDonald's Corp (MCD.N), the world's largest hamburger chain, reported a lower-than-expected rise in global same-store sales in May and warned that austerity measures in Europe were taking a toll. McDonald's stock fell 0.7 percent to $87.75, causing the biggest drag on the Dow.
Stocks' strong gains came about a week after the benchmark S&P 500 index fell more than 6 percent in May and dropped just below its 200-day moving average, signaling a technical bounce for equities.
But the rally took place on light volume of 6.2 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, compared with the year-to-date daily average of 6.85 billion shares.
Shares of Facebook (FB.O) added 3 percent to $27.10.
CNBC reported that Swiss bank UBS (UBSN.VX) may have lost as much as $350 million from trading Facebook's stock amid the confusion of the social network's glitch-ridden debut on May 18. UBS was not immediately available for comment.
Though financials gained steam late in the session, telecommunications was the day's best-performing S&P 500 sector. Verizon Communications Inc (VZ.N) gained 1.9 percent to $42.44 and the S&P telecom sector index .GSPL rose 1.5 percent.
Among other names in the news, Chesapeake Energy Corp (CHK.N) plans to sell its pipeline and related assets to Global Infrastructure Partners in three separate transactions worth more than $4 billion, as the company scrambles to plug an estimated $10 billion funding shortfall.
In addition, Chesapeake shareholders delivered a broad rebuke of the company's board, withholding support for two members up for re-election in the wake of a governance crisis and poor financial performance. Chesapeake's stock gained 2.9 percent to $18.36.
Best Buy Co Inc (BBY.N) founder and Chairman Richard Schulze resigned from the retailer's board on Thursday and said he was exploring options for his 20.1 percent ownership stake, a move seen as a possible precursor of a Schulze-led private takeover.

Room for Debate: Are Banks Making Too Much Money From Fees?

AppId is over the quota
AppId is over the quota
Kevork Djansezian/Getty Images

Some banks have begun offering lucrative services that were once left to check cashing storefronts and payday loan outfits. The banking industry as a whole earned nearly $30 billion last year from overdraft fees on debit cards and checking accounts. Two years ago almost all banks offered free checking, now about a third do. Since the collapse of the housing bubble, and the recession, banks have been making more money from consumer fees. Do these charges need to be more closely regulated or limited, or are they necessary for the health of the banks, and the economy.

Read the Discussion »

View the original article here

Japanese banks project better than expected year

Three of Japan "megabanks"-Mitsubishi UFJ financial group, Mizuho Financial Group and Sumitomo Mitsui Financial Group, is already expected to see heavy Bond trading gains and low levels of write-offs of bad loans, which have raised profits in recent years.
Since Japan's long battle against deflation persists, loan demand in the home is likely to remain slow, adding to pressure banks to move to expand abroad and compensate their prospects for lack of internal growth.
"We want to see if they can generate solid gains on loans under the current situation of low interest rates," says Chikako Horiuchi, Director of financial institutions of Fitch Ratings. "The driver will be overseas loans, so we must see how the banks to increase the volume in overseas loans. This will be key to determining the profit Outlook for the banks, "it added.
On Tuesday the second largest lender of Mizuho, Japan by assets, forecast net profit of ¥ 500 billion, or $ 6.26 billion, for the financial year ending in March 2013, this is well above the expected profit of 374.2 billion ¥, but to only 3.1 per cent of the year casts. The improvement is mainly due to expectations that its investment banking arm, Mizuho Securities, will swing to profit in the current year, after the loss of booking last year.
Sumitomo Mitsui expects net profit for the year, beginning on 1 April of ¥ 480 billion, down 7.4 percent last financial year, but the consensus estimates of analysts for the remuneration of 441.2 billion ¥. Mitsubishi UFJ, the largest creditor of Japan, forecast net profit of 670 billion ¥. This would represent a reduction of the rate of 31.7 of the year casts – when profit is removed from a hefty one-time accounting gain on the value of its investment in Morgan Stanley 22%-and is in line with analysts forecasts.
With limited exposure to the troubled debt of Europe Japanese banks enjoy solid income a year, which throws. Their results have been removed from trading profits of the bird Government bonds, while their large equity portfolios I have these adjustments during the January-March quarter, since the criterion high stock market index rose 19.3 percent.
Exploiting the retreat by European rivals in Asia and other markets, the Japanese banks have benefited from the sharp growth in overseas lending and an active search is based on a series of recent acquisitions. In January Sumitomo Mitsui agrees to purchase the lease of the aircraft business of the Royal Bank of Scotland, in a transaction value 7.3 billion. Mitsubishi UFTJ, whose unit is UnionBanCal says, will buy based on California Pacific, Capital Bancorp for about 1.5 billion dollars, said it may spend more than 1 trillion ¥ over the next three years, foreign acquisitions.
But forecasts for the growth of entries in the books of overseas borrowing of the largest banks in Japan is not sufficient to compensate for a fall in their home market, which still accounts for 70% to 80% of the profits. The outstanding loans of large Japanese banks fell to 30-straight month in April, down 1.3% from a year earlier, according to data from the Central Bank.

Room for Debate: Are Banks Making Too Much Money From Fees?

AppId is over the quota AppId is over the quota Kevork Djansezian/Getty Images
Some banks have begun offering lucrative services that were once left to check cashing storefronts and payday loan outfits. The banking industry as a whole earned nearly $30 billion last year from overdraft fees on debit cards and checking accounts. Two years ago almost all banks offered free checking, now about a third do. Since the collapse of the housing bubble, and the recession, banks have been making more money from consumer fees. Do these charges need to be more closely regulated or limited, or are they necessary for the health of the banks, and the economy.
Read the Discussion »