Seven of the UK’s largest banks have changed the way that they charge people for returned direct debit payment, which could save customers a lot of money. It is believed that the unnecessary charges could be costing customers as much as £200million each year.
Until now banks often process direct debits in the early hours of the morning, sometimes soon after midnight. If a customer’s salary or other payment is processed into the bank after the direct debit has occurred the customer would be charged by the banks for a lack of funds, despite the funds being in the account on the same day.
Now what the 7 banks that have changed are doing is that if a payment fails, rather than immediately issuing charges and returning the direct debit as unpaid, it will retry the payment later on in the day to see if additional funds have cleared into the bank. This should also mean that people should be able to deposit cash on the same day to cover the cost of the payment to insure that the payment is processed on time.
The Bank of England has held interest rates at a record low and also decided not to implement more quantitative easing.
Sir Mervyn King has pushed for QE, who has been arguing the case for more monetary stimulus in recent months but was out voted on every occasion, however it is unclear how he voted today until the minutes are published. Minutes from the 2 day meeting will be published on June 19th.
Today was his last Monetary Policy Commission meeting as Governor as he is now due to retire. He has been heading the Monetary Policy Commission that sets the base rate of interest for the country for the last 16 years. King has voted at every single meeting that decided the country’s interest rates since the Bank of England became independent in 1997.
Mark Carney has been appointed by George Osborne as the next Governor of the Bank of England. The position is normally held for an 8 year period but Carney has hinted that he may step down after 5 years.
The Cooperative bank has been forced to put lending on hold to small businesses that submit new applications as part of measures to try to repair some of the void left in its capital after its credit rating was pretty much destroyed overnight. The bank’s credit rating was downgraded by 5 steps despite protests by it that it was perfectly fine.
The bank has had to put any new loan applications on hold for small businesses which looks bad when this is the exact opposite of what is being encouraged by the government in a bid to stimulate the economy, although it has said existing applications will still be processed while it is in talks with the Prudential Regulation Authority about how to bolster the banks shortfall in capital.
It is believed that one possible solution would be for the bank to see the bank separate its good and bad assets, to hopefully improve the standing of the bank sans toxic assets. The discussions with the PRA could last between four and six weeks.
The Bank of England will not be injecting more cash into the economy following a meeting of the Monetary Policy Committee (MPC). The MPC meet regularly to decide what to do with regards to Britain’s economy and the flow of money from the bank, and one of the things they vote on is whether to continue the process of quantitative easing (QE) whereby the Bank buys back government gilts from investment banks in order to give them a cash injection and allow them to give out more loans.
The move has come as something of a surprise to some spectators as there have been indications from members of the MPC that they are worried about the way the economy is going. The Ernst & Young ITEM Club’s Nida Ali is one of these, saying she found the decision “a little surprising in light of the dovish comments made by several Committee members since the last meeting. There is a real sense of “if not now, then when?”. The MPC are sending mixed signals which are adding to the sense of uncertainty. We would be strongly in favour of looser monetary policy and had been encouraged by the MPC’s recent comments and by signs that they were starting to think outside the box. But talk is cheap and it is time that they delivered.”
The Bank of England has been doing a dreadful job of trying to bring inflation under its 2% target and are now expected to announce that inflation will remain high in this quarter as well after a much-hoped-for drop in January failed to materialise.
The 2.7% inflation figure from December carried over into January as well, with increasing energy prices and food bills taking most of the blame. A poor winter and autumn for growers in the UK meant that more vegetables had to be imported, driving up food prices.
This isn’t a new situation for the Bank, as they have had to revise up their inflation forecasts again and again during the financial crisis. IHS Global Insight’s Howard Archer spells out how the situation appears to anybody who has been watching the Bank of England during this period: “Once again the Bank of England will likely have the dismal task of raising its consumer price inflation forecasts and cutting its gross domestic product growth projections.”
The banking industry has suffered another blow after the Financial Services Authority (FSA) ruled that the rate swapping deals they have been offering to small businesses for years have been mis-sold in 90% of cases.
The rate swapping deals that were offered to businesses were supposed to protect them against rises in the base interest rate set by the Bank of England. If the rate went up, the businesses would need to pay more interest on any loans that they had taken out with the bank, but these rate swaps were a safeguard against that.
However, many businesses feel they were not adequately warned of the downside of the deal, which meant that these businesses are now locked into a higher interest rate than they would be if they hadn’t taken the deal. The record low 0.5% rate at by the Bank means that businesses who get loans can do so at massively reduced rates, but the businesses who rate swapped can’t.
The banking industry in the UK has been rocked by the payment protection insurance scandal over the last couple of years, with the public reeling from the level of mis-selling that took place in these trusted financial establishments for a period of over ten years.
Customers who took out loans or credit cards found that they had been tricked into paying for PPI when, in many cases, it was totally useless to them. As the claims process has gone on, the banks have lost battle after battle to stop the compensation payments being made, but now they have no recourse left. However, it has emerged that some don’t see this as an issue and have just been ignoring claims that come in or denying them baselessly.
Lloyds TSB, Barclays and RBS are the worst offenders. Lloyds TSB tops the list, rejecting around 1,600 claims for compensation a month. When these decisions are turned over to the Financial Services Authority (FSA) the regulatory body upholds an average of 98% of them. Barclays reject about 3,300, and 93% are overturned, whilst RBS turn down 300 a month and are forced to then pay 87% of the claims that reach the FSA.
Following the revelations of the Libor scandal this year, the Financial Services Authority (FSA) began putting in place the processes by which Libor could be regulated, making banks participate in a panel that would set the interest rates openly, rather than leaving it done by a small number of banks behind the scenes.
The measures were brought in after one of the FSA’s top executives, Martin Wheatley, suggested that the debate be opened up to bring more institutions into the setting of Libor. It’s a proposal that went down well with people at the FSA, but, so far, no banks have stepped forward to become the extra members of the panel.
However, this isn’t deterring the FSA, who are considering forcing banks into joining the panel if this level of reluctance continues to be shown.
Despite repeated speculation from numerous sources, the minutes from the Bank of England’s last meeting of the Monetary Policy Committee (MPC) appear to almost entirely rule out a cutting of the interest rate below the current historically low 0.5%.
The minutes reveal that members of the committee consider it “unlikely to wish to reduce Bank rate in the foreseeable future,” which will come as a relief to savers but means that the interest rates on mortgages won’t be getting another drop either. However, loans and mortgages have already seen large drops on the interest rates payable on them thanks to numerous policies designed to encourage lending, such as the Funding for Lending scheme and Quantitative Easing.
Speaking on Quantitative Easing, the Bank is considering boosting the amount funnelled to the banks by another £25billion, which will take the total to £400billion. It’s a huge figure and one that many people are worried about, but the Bank have launched repeated defences of QE and claim that it does work.
The policy of buying assets from banks has been put on hold by the Monetary Policy Commission of the Bank of England, suggesting that they believe the economy may be strong enough to support itself on its own for the moment, no longer needing the boost to lending that quantitative easing (QE) provided.
The policy has already seen £375billion printed and given to the banks, and this pause is being welcomed by those who thought that QE was pushing up inflation and causing savers to lose out. The director general of Saga, Dr. Ros Altmann, was one of those who felt QE negatively impacted savers, particularly pensioners, and said the following after this pause was announced: “The Bank itself has always admitted that Quantitative Easing is a drastic policy experiment which it has introduced because “conventional” policies had been exhausted.