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The Friday 15: reasons we don't trust the banks
News that the banks are in trouble again for mis-selling, just days after Barclays was hit by a record £290 million fine has once again shaken our faith in the banks.
by Victoria Bischoff on Jun 29, 2012 at 09:11Follow @VBischoff
News that Barclays, HSBC, Lloyds and RBS, are in trouble with the financial regulator once again for mis-selling – this time interest rate protection products to small and medium sized businesses – is just the latest in a long line of scandals to hit the banking industry in recent years.
In fact, it was only earlier this week that Barclays was slapped with a whopping £290 million fine for fixing bank lending rates.
As chancellor George Osborne said, ‘failures in our banking services have cost this country billions’.
Here we walk you through a number of reasons our faith in the banking industry is hanging by an ever-thinning thread…
1. The credit crunch
UK taxpayers spent billions bailing out some of the UK’s largest banks, such as Lloyds and RBS, during the financial crisis – a crisis for which bankers’ greed and completely irresponsible lending practices was largely to blame.
2. Computer meltdowns
IT failures are an all-too frequent occurrence among the banks. Just this week Royal Bank of Scotland’s IT failure this week left millions unable to access their money, while Clydesdale and Yorkshire Bank customers have been hit with debit card problems five times so far this year.
3. PPI mis-selling
Payment protection insurance (PPI) is supposed to cover loan repayments in the event you can't work, but the banks have come under fire in recent years after it emerged they had sold the policy to millions of customers. In fact, PPI is now the most complained about financial product ever, with the scandal expected to cost the banking industry some £9 billion in compensation.
4. Mis-selling investments
Speaking of mis-selling, a number of banks have been fined by the Financial Services Authority (FSA) in the past few years for mis-selling investments to customers. In January last year Barclays was fined £7.7 million for investment advice failings, RBS was fined £6 million in November, HSBC £10.5 million in December…need I go on?
5. Banker bonuses
Banker pay has been the source of extreme controversy in recent years, with executives continuing to amass huge personal fortunes at a time when the banking industry is suffering big losses.
Just two months ago, more than a quarter of Barclays investors humiliated the bank’s directors by voting against their big bonuses – which were awarded despite falling profits. Earlier this year, meanwhile, chief executive of the 83% taxpayer-owned bank RBS, Stephen Hester, was pressurised into giving up his £1 million bonus.
6. Sales targets
These days walking into your local bank branch can be a bit like walking into a Black Widow spider’s web…OK, so that’s a small exaggeration, but ever increasing pressure on bank staff to meet sales targets means that going to the bank has become one long sales pitch and if you don’t have your wits about you, you could end up paying for a product you don’t really need.
7. Low saving rates and high borrowing rates
The Bank of England base rate might have been held at a record low of 0.5% for 39 months – leaving savers with barely a handful of inflation-beating accounts to choose from – but this hasn’t stopped banks edging up mortgage and overdraft rates. Banks put this down to increased borrowing costs but it’s not difficult to see why customers are feeling pretty hard done by right now.
More about this:
Look up the shares
- Royal Bank of Scotland Group PLC (RBS.L)
- Lloyds Banking Group PLC (LLOY.L)
- Barclays PLC (BARC.L)
- HSBC Holdings PLC (HSBA.L)
More from us
- The Friday Five: why banks are causing a panic
- PPI becomes most complained about product ever
- HSBC hit with record fine for mis-selling to the elderly
- Barclays defends 'highly abusive' tax-avoidance schemes
- Q&A: your rights following the Natwest and RBS banking disaster
- Clydesdale and Yorkshire customers suffer more debit card problems
- Four major banks mis-sold to business customers for a decade
- Barclays fined £290 million for fixing bank lending rates
- Stephen Hester,
- Investors give Barclays a bloody nose over boardroom pay
- FSA fines Barclays £7.7m over sale of Aviva funds
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