The FSA says that fines ammount to over £3million and are split between  HSBC Life, HSBC Actuaries and HSBC Insurance Brokers. The three units of the bank had failed to put in place adequate systems and controls to protect customer data from being lost or stolen, says the financial regulator.

HSBC Life received a fine of £1.61 million, HSBC Actuaries fined £875,000 and HSBC Insurance £700,000.

The FSA say that last year HSBC Life lost an encrypted CD containing the customer details of 180,000 policy holders which had been lost in the post.

hodge lifetime ifa confidence index

One year on from it’s original publication The Hodge Lifetime IFA Confidence Index has just published it’s fifth quarterly report addressing the concerns,  perceptions and issues facing Independent Financial Advisers (IFA) within the equity release industry.

The latest report shows that 75% of IFAs say that interest in equity release schemes has stayed steady or shown a slight increase over the last year.

All IFAs surveyed had total confidence in advising on equity release, while 30% felt that their confidence in advising on the product had considerably increased during the year.

Tailored Advice:  The effect of equity release schemes upon state benefit entitlement remains the most important area of advice for advisers (33%), with charges and guaranteed drawdown facility ranking as the second and third most important areas (27% and 18% respectively). However, the emphasis placed on advice surrounding rates has declined over the past year.

Concerns: The negative reputation of the equity release sector portrayed by the media was the top concern harboured by IFAs (28%), and 23% still expressed their worry about the potential for equity release to be confused with sale and rent back schemes. These findings mirror those of Hodge Lifetime’s first Confidence Index from summer 2008, where both the media influence and sale and rent back confusion ranked first and second place. However, while the media portrayal remains the primary concern, fewer IFAs feel that this is the largest current problem facing equity release this year and there is now growing emphasis on unnecessary concern over falling house prices and the fear of FSA mystery shopping.

Looking ahead: With SHIP figures showing an increase in the number of plans sold in Q2 and a continued interest in the equity release market, Hodge Lifetime’s report also finds that advisers are in a strong position to take advantage of this. Looking ahead to the future, 30% of IFAs said that they planned to network more with local solicitors and mortgage advisers, 23% said they would make more use of direct marketing and 23% said they hoped to obtain referrals from existing clients as a means of increasing their equity release business in the coming year.

UK-Finance-News summary: The report shows that while IFAs have total confidence in the product, more needs to be done to instill confidence in the consumer, who is looking for a product supplied with total transparency and without future risk and complications.

The FSA propose that the public would be given access to data regarding the number of complaints received, the main products or services generating the complaints and the outcome of those complaints.

Companies generating the most complaints will be required to publish a detailed account of complaints they have opened and closed, what percentage have been closed within two months and what percentage have been upheld.

Companies will be required to update details every six months which will then be published by the FSA. The information will be broken down into five areas of finance, banking, home finance, general insurance, life and pensions and investments.

The FSA are making the proposals in an attempt to help ‘raise industry standards in this important area’. FSA director of retail policy and conduct risk, Dan Waters says:

“Transparency is an important regulatory tool. Publishing complaints data will mean that people can learn more about how firms handle complaints and the frequency with which they arise.”

The new approach is designed to permanently change the behaviour of those who breach market rules by imposing punitive costs on them, wiping out any profit they make from their wrongdoing, the FSA said in a statement today.

The FSA say that under the new proposal a company found guilty of breaking the rules would be fined up to 20% of the income from the product or activity deemed to at fault. Individuals found guilty of breaking rules would be subject to a minimum £100,000 fine.

“By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules,” said FSA director of enforcement Margaret Cole.

The new rules are open for consultation until October 21st, the FSA expect the rules to be in place by the start of February 2010.

Darling did not mince his words in an interview with The Independent when he said; “There are people who are too complacent in my view. They need to be brought back to earth.”

“It is not them I am particularly worried about. It is the rest of us who are being affected by it. The individuals concerned [in the banks] are not operating on their own. Some are only operating at all because of very substantial support from taxpayers, who are entitled to tell the Government we must not repeat the mistakes. If they go back to the way they were – to business as usual – without asking themselves over and over again whether they understand what they are doing, that would be disastrous for them and the rest of the world.”

Strong words from Darling, who is hoping that the White Paper to be unveiled next week will bring the Bank of England (BoE) and the Financial Services Authority (FSA) into a more workable partnership, with both sides promised more powers.

The bank will play a more central role in preventing a future boom and bust crisis and assessing risks to the banking system as a whole as well as individual banks.

The FSA will be responsible for not allowing a return to the ‘bonus culture’ of pre-crisis banking, they will also have the power to force banks dealing in high risk areas, to increase capital reserves as a safety net.

The chancellor insisted that the two parties would work closer together in the future saying “They are not competing with each other. They are complementary.”

Central Banking in a Free Society

The Bank of England should be privatised and once again empowered to regulate the banking system, according to a controversial new book, Central Banking in a Free Society, written by Professor Tim Congdon and published by the well respected political think tank, the Institute of Economic Affiars (IEA).

Professor Tim Congdon, argues that Gordon Brown’s 1997 changes to the structure of financial regulation have been largely responsible for the catastrophe that has hit the British banking industry.

The reversal of these changes, including the return of banking supervision and regulation to the Bank of England, is essential. Congdon argues that the Bank of England could do its job most effectively if it were privatised.

Like the Federal Reserve in the USA, it should be owned by the main commercial banks, which are its principal stakeholders.

Professor Congdon said:

“The current financial crisis raises fundamental questions about the relationship between the commercial banks and the Bank of England. Before 1997 Britain had a system in which the Bank of England had an understood responsibility to act as lender of last resort to the banks and to help them if they had difficulty funding their assets. That system was a success, which was copied around the world. Unfortunately, it was undermined by Gordon Brown’s so-called ‘reforms’ at the start of his Chancellorship, leading to the worst financial crisis in this country since the South Sea Bubble.”

He goes on to say,

“The Bank of England should be privately owned – as it was for more than two and a half centuries prior to 1946. Its capital should be provided by the commercial banks and it should have regulatory power over these banks in addition to providing a lender of last resort facility. These supervisory and lender of last resort functions are inseparable.”

In conclusion, Central Banking in a Free Society boldly states:

“If we do not seize this opportunity to establish a sound and viable structure for British banking, we face the very real risk that we will lose a major proportion of our financial services industry to markets regulated by the European Central Bank or the Federal Reserve.”

The report also argues that:

• The lender of last resort facility should be extended liberally, but at a penalty rate, to banks which are illiquid (as was the case with Northern Rock), but not to banks which are insolvent.
• The Bank of England has been shown to lack the necessary expertise to deal with the current crisis, in large part due its dismemberment, and loss of staff and expertise, since 1997.
• The Bank of England has almost ceased to be “a bank”. Rather than behaving as a banker to the banking system, to which it must sometimes lend, it has increasingly resembled the economic research department of a university, with too narrow a focus on the control of inflation.
• A structure in which the central bank was owned, and its capital provided, by the commercial banks would set up a better pattern of incentives than the present arrangements. The member banks would resent having to incur losses on last resort loans extended to one of their number, if the deviant bank had been irresponsible in its lending. On the other hand, member banks would have a strong incentive to encourage the central bank to accept low cash and liquidity in the banking system, and an appropriate level of capital, since too high cash and capital ratios affect their profitability. The central bank would be subject to a benign set of checks and balances.
• Last resort lending has been alleged – notably by the Governor of the Bank of England, Mervyn King – to encourage “moral hazard” (i.e., irresponsible risk-taking). But the historical record is clear, that the expanded deposit insurance arrangements favoured by King and others are a far more important and dangerous cause of irresponsible risk-taking by deposit-taking institutions than a lender of last resort system.

Professor Philip Booth, the IEA’s Editorial Director, said that the report was published at a time when no major political party in Britain seemed willing to contemplate a radical restructuring of regulation in response to the recent crisis.

Professor Booth said:

“Too often, the response of opposition politicians to present events has been a claim that they wouldn’t have started from here. This is woefully inadequate in the context of the present crisis. Granting independence to the Bank of England in 1997 over monetary policy was widely and rightly praised. However, other key aspects of Gordon Brown’s reforms have either caused or exacerbated the difficulties afflicting the British financial system today. A privatised Bank of England – with appropriate regulatory powers and expertise – would provide a sound defence against the recent problems being repeated in future.”

Professor Booth continues by saying:

“Regulators have failed in almost every respect in the current crisis and yet the FSA are now actively claiming still more discretionary powers. What we need is narrow but incisive regulation to deal with potential fragilities in the banking system. Opposition parties that support the market economy need to make the case for a new approach to regulation. Sadly, this is a debate in which British political parties have yet to engage. There is every sign of the political debate being dominated by the European Union, the FSA and the Treasury each of which has almost unlimited desire to increase their regulatory powers yet further.”

Professor Tim Congdon is an economist and businessman. He was a member of the Treasury Panel of Independent Forecasters between 1992 and 1997.  He has been a visiting professor at Cardiff Business School and City University Business School.

Central Banking in a Free Society by Professor Tim Congdon is published by the IEA, price £12.50

Having learned absolutely nothing from it’s collapse, Northern Rock continued to operate in the same fashion that  had bought about it’s collapse while using government money and under the watchful eye of the Treasury. Indeed during the period the bank allowed 1.8billion of risky loans through their ‘Together’ mortgage package.

The ‘Together’ mortgage offers 95% secured mortgage to it’s clients along with a further unsecured loan, which can be used for any purpose, up to a value of 30% of the house price.

At 31 December 2008, Together mortgages represented around 30 percent of the mortgage book but about 50 percent of overall arrears and 75 percent of (home) repossessions.

The Treasury has been further criticised for accepting the Northern Rock business forecast for future trading, with a plan that had assumed a 5% fall in UK house prices between 2008 and 2011.

Despite the UK government insisting that it will do everything within it’s power to avoid another ‘Northern Rock disaster’, the truth as everyone knows is very different indeed.

The world is focused on how successful the UK attempt at restoring the economy through quantitative easing will be, previous measures of reducing interest rates and vat cuts have had little or no impact on real life economy in the UK ,  calling for the use of more unconventional methods by the country’s policy makers.

The central bank hopes that by buying up bonds, making yields fall sharply, it will make it cheaper for companies to borrow on the capital markets. Institutions that have sold gilts to the Bank, meanwhile, will have extra money to lend.

Unbelievably Lloyds appeared  surprised when it announced on Friday that HBOS would make a pretax loss  of  £10bn, in excess of  expectations due to a jump in losses on corporate loans at the tail end of last year. The news had the immediate effect of wiping a third off the value of shares in the bank on Friday and has continued to see further losses on the stockmarket this morning.

Eric Daniels chief executive at Lloyds had previously given no indication of the problems at HBOS, but has said that his bank would have put in 3-5 times more due diligence on the takeover if it had not been so hurried.

If that is true, it is apalling that this takeover ever happened. Were Lloyds that desperate for State aid that they would take on a business riddled with debt that they had no idea about?

Paul Moore was employed as risk manager with HBOS between 2002 and 2005, his warnings that the bank was going too fast, “had a cultural disposition to challenge” and was a serious risk to financial stability and consumer protection, fell on deaf ears and culminated in Moore being dismissed from his position with the bank.

Moore claims that he received substantial damages in return for signing a gagging order, he is allowed to give evidence without fear of breaching the order due to the committee’s Parliamentary privilege protection.

The claim has led to the resignation of Sir James Crosby as deputy chairman of the Financial Services Authority, after Moore revealed that Crosby was not only responsible for his dismissal, but was also the ‘original architect’ of the strategy that led HBOS to near collapse.

The HBOS and RBS chiefs present were accused of arrogance after insisting that they were not personally to blame for fuelling the financial crisis.

To add more embarrassment to Gordon Browns Labour government, Crosby has been a personal advisor to Brown throughout the financial crisis, despite the Prime Minister spending the last few months condemning ‘irresponsible’ bankers.