Banking Industry

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Govts cannot allow banks to fail, because if they did, over 97% of all money would immediately disappear. This is why, in the event of a crisis, the risk is transferred to the taxpayer. ... The Fiat System is debt-based: it distributes money from small business and the less well-off to the rich. ... Banks create our nation's money supply, which they should never have been allowed to do. 97% Owned

Interesting article. Not well argued, no conclusions as such, but makes some very interesting points. The payments system is a vital public service – why don’t we run it like one?, Nov.09.2017

Who Owns Who

We're Here For You
UK banks are using your money to fund climate change. It's time we put a stop to it.

Climate Change / Sustainability

The Magic Money Tree: How our financial systems could support, not undermine, a sustainable future. Dr Bevis Watts. The Burntwood Lecture 2017

  • Nov.29.2017: Bank Bashing Is Pointless: We Need To Show Banks Can Be A Force For Good. The financial sector is uniquely placed to lead the transition to the sustainable economy. While achieving globally agreed climate ambitions would clearly be in the long-term interests of both the financial sector and the economies it is supposed to serve, a staggering $1trillion continued to be invested in fossil fuels in 2015, while only $300billion or so was invested in renewables. Bevis Watts, MD Triodos Bank UK, HuffPost.
  • Nov.02.2017: This Spoof Ad Sums Up Everything That’s Wrong With The Banking Industry (Video) Banks must move away from fossil fuels to meet climate goals. This spoof advert from anti-poverty NGO Christian Aid speaks to an uncomfortable truth the banking industry would no doubt rather we forgot: banks funnel our money into fossil fuels: coal, oil and gas projects that contribute to climate change. The ad was created to tie in with a new Christian Aid report, published on Thursday, which calculates that the world invests £3.24 in fossil fuels for every £1 in renewable energy. In the UK, HSBC, Barclays, RBS, Lloyds and Santander were calculated to have more than £66bn invested in coal, oil and gas extraction in 2012. A ComRes poll found 80% do not want banks to invest their savings in projects that damage the environment and 77% agree banks should be stopped from doing so. Tess Riley, HuffPost News.

Financial Weapons of Mass Destruction

  • Answer = derivatives, aka credit default swaps
  • undated, 2012?: Credit Default Swaps: Innovation, or Weapon of Mass Destruction? In essence, CDS are like an insurance policy in that it obliges the seller to compensate the buyer in the event of a default; they act as insurance on securitized debt. The buyer of a credit swap is protected and the seller guarantees the product's credit worthiness. But the nagging question focuses on what is real, and what has true value. CDS are a form of derivatives. A derivatives' value is literally derived from the value of the underlying asset (or should be). Underlying assets can include: bullion, securities, livestock, currency or pretty much anything else that has genuine value. The Shareholder Activist.

Money Creation

Note: this lot is also in Economic_Policy#Money Creation

  • Jan-Mar.2014: Money creation in the modern economy. This article explains how the majority of money in the modern economy is created by commercial banks making loans. Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits. The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or "quantitative easing". Michael McLeay, Amar Radia, Ryland Thomas, Bank of England's Monetary Analysis Directorate.

The three types of lending:

  1. Into business and industry - gives a good return in GDP and doesn’t lead to inflation
  2. To consumers – leads to consumer price inflation
  3. Into real estate and financial speculation – leads to asset price inflation and gives a poor return in GDP and shows up in the graph of debt-to-GDP

It's too much of type 3 lending that has caused neoliberalism its problems. Werner explains in the video: Money creation in the modern economy (Mar.12.2014).

  • May.2012: 97% Owned. 97% owned present serious research and verifiable evidence on our economic and financial system. When money drives almost all activity on the planet, it's essential that we understand it. Yet simple questions often get overlooked, questions like; where does money come from? Who creates it? Who decides how it gets used? And what does this mean for the millions of ordinary people who suffer when the monetary, and financial system, breaks down? Michael Oswald, 97% Owned.com. Essential viewing.

Open Banking

  • Jun.21.2018: Banks are sleepwalking to disaster unless they truly embrace change. The biggest threat to banking’s big beasts. That, arguably, comes in the form of the Open Banking reforms, introduced in January. Once they have got off the ground, they could lead of the very notion of what a bank “is” being pulled apart, making not only physical branches a thing of the past but also the basic idea that a bank takes in customers’ deposits that it converts into loans. By allowing customers to give access to their bank account details to new providers through safe new technology, “Open Banking could open the door to the ‘unbundling’ of banking”, Mr Brazier said. Open Banking will allow them to sign up to new financial technology aggregation services that will look for the best interest being paid on deposits and then will sweep customers’ money from place to place (and away from their banks) without people having to give it any thought. That could have big implications for big banks, which save about £1 billion each year from paying rock-bottom or no interest to depositors and which they rely on as stable funding to back loans to other customers. In future, banks will have to work much harder; There will be extra costs, too, as regulators force banks to hold more liquid assets, such as government gilts, to cover the risk of customers’ money flowing out of the door. Banks may lose a lot of their deposits, which they will have to replace with more expensive funding in the money markets, and their relationship with customers, who may come to see the new aggregation services as their point of contact with their money. Yet banks appear to be sleepwalking into all this, as they close branches, do not tend to service and impose high charges — all moves that are likely to alienate customers and incline them to remove their deposits when easy opportunities present themselves. Katherine Friffiths, The times.

Global Finance, Debt and Sustainability

Charges

  • Mar.10.2018: The £1bn cost of your holiday cash. Failing to shop around for the best foreign exchange deals is costing Britons £1.15 bn a year in hidden charges when exchanging foreign currency before they travel. In addition to the exchange rate there can be membership fees, delivery charges and interest to pay. According to the govt-backed Money Advice Service, 75% of travel money is exchanged in the UK before people set off abroad. Some 85% of people said they believed the difference between rates was negligible, and 90% always got their travel money from the same supplier — many from the Post Office. (+ "how to get the best rates") The Times, Carol Lewis
  • New banking scandal could cost savers billions. Culture of greed? Banking chiefs last month apologised for rigging the world’s $5.2tn foreign exchanges. They blamed a relatively small number of rogue traders saying they brought disgrace to the financial services industry. But a recent devastating report by the Financial Conduct Authority (FCA) suggested the City could be over-charging pension funds and other investors to the tune of tens of billions of pounds through the most basic financial services function: executing the buying and selling of shares, bonds and foreign exchange. In Jul.2013, the FCA surveyed 36 banks, wealth management firms and inter-dealer brokers to establish whether they had adequate policies and compliance checks in place to give reasonable safeguards that clients’ orders were being executed in a timely, fair and efficient fashion. The FCA calculates that over a 30 year period investors would be £37.5 billion better off if the costs of trading were reduced by just one hundredth of 1%. On foreign exchange markets alone, analysis suggests that miniscule markups in the costs of transactions could cost Britain’s 20.7m pension holders £7.5bn every year: that’s £300 per pension holder each year. Just 13 firms dominate a market which oversees assets worth £165bn each year. These hidden costs may be a major reason UK pensions holders actually lost money in the 12 years to 2012. "The City appears to have a cultural problem with transparency and disclosure." ShareAction, a charity that promotes responsible investment by pension funds and fund managers, is worried this will increase the potential for the lowest paid people in the country to lose money they cannot afford to unscrupulous City traders. Nick Mathiason, TBIJ.

Banking Scandals

  • Nov.19.2018: Whistleblower reveals more players in £178bn Danske Bank scandal. A European lender and two US banks alleged to be involved in money-laundering case. A major European lender and two US banks have become embroiled in an alleged €200bn (£178bn) money-laundering scandal at Danske Bank, following new testimony by a key whistleblower. Howard Wilkinson, who served as head of Danske Bank’s trading unit in the Baltic region until 2014, told a Danish parliamentary hearing that other lenders were involved in processing billions of dollars worth of suspicious payments with links to Danske’s Estonian branch. Deutsche Bank, JP Morgan and Bank of America were all reportedly involved in clearing dollar transactions for Danske’s Estonian branch in Tallinn. Kalyeena Makortoff, Reuters, The Guardian.
  • Mar.05.2018: Libor ‘conspirator’ escapes with fine. Tom Hayes was sentenced to 14 years in prison, later reduced to 11 years, for his role in the scandal. Guillaume Adolph had been identified as a co-conspirator. The Times, Harry Wilson
  • Feb.26.2018: Russian millions laundered via UK firms. Denmark's biggest bank Danske believes cash was funnelled through British companies by people linked to Vladimir Putin's family and the FSB spy agency. In Sept.2017 it emerged that the same branch was at the centre of a secret lobbying operation. The latest revelations concern a different group of firms, most registered in London. The Guardian, Luke Harding
  • undated: UK Bank & Scandals: A Match Made in Heaven. Since the Global Financial Crisis in 2007/08, several large banks were discovered to be committing large-scale malpractice, fraud or miss-selling of financial products — for the purpose of reducing costs and raising profits. Since 2008, the activities for the UK’s 5 largest banks have led to over £25bn in fines levied upon them by various regulatory agencies around the world including the UK's Financial Conduct Authority (FCA). The exact nature of the banks' wrongdoing is wide-ranging and multifaceted which has led to an unprecedented level of intra-national co-operation between the worlds' financial regulatory authorities such as the FCA, NFA, CFTC, ASIC, BoJ, FinMin and BaFin. The Best Known UK Bank Scandals of All Times List MoneyTransferComparison.com, '

Peer-to-peer lending

Peer-to-peer lendingWikipedia-W.svg

Contactless Cards

See also Cashless Society

  • Apr.21.2018: Thieves plundering contactless cards at a rate of £27 a minute: How to stop criminals making off with your cash. Fraudsters are stealing money from contactless payment cards at the rate of almost £27 every minute. Spending this way soared last year to above £52billion – double the amount in 2016 according to industry body UK Finance. Unlike conventional cards, contactless cards contain a special chip that emits radio waves that can be easily read by a payment terminal – and cuts out the extra seconds it takes to tap in a PIN. Card providers offer reassurance to customers that any spending on snatched contactless cards is kept in check because each transaction is capped at £30 – with a further safeguard that after a ‘random’ number of purchases shoppers are asked to enter their PIN to prove a card is theirs. Martyn James, of complaints service Resolver, says the banks’ attitude to contactless crime smacks of ‘complacency’. Most banks issue contactless cards by default for new and replacement cards – though many providers such as Santander and RBS will provide the old style chip and PIN cards on request. Barclays says just one per cent of debit card holders request the older version while its Barclaycard credit card arm only issues contactless varieties on the basis that ‘contactless payments are integral to ensuring our customers are able to pay conveniently, securely and quickly for small value items’. UK Finance defends contactless cards, saying the losses pale into insignificance compared to online fraud. List of How to stop criminals making off with your cash. Sally Hamilton, This is Money.
  • Simple solution to stop thieves from using a Reader to get your card info in your wallet/handbag without you knowing: wrap the card in foil or some such. Quora

Articles

  • May.02.2018: Banks slash interest rates for savers. Banks have quietly cut their interest rates for savers, defying calls from the governor of the Bank of England to do more for customers after the recent base-rate rise. Campaigners had called on banks to end what they termed “years of devastation” for savers by adding last November’s base-rate change, which went up by 0.25% points to 0.5%, on to savers’ interest rates. However, an analysis of activity reveals that several banks have cut savers’ rates for popular products with little or no announcement. Tesco Bank, Virgin Money, Paragon Bank, Wyelands Bank, Lloyds, Bank of Scotland. An analysis by Which?, the consumer watchdog, last week showed that nine out of ten banks did not pass on the rate rise in November in full, although more than half increased their standard variable rate mortgages — significantly increasing costs for customers. David Byers, The Times.
  • Apr.25.2018: Banks’ failure to raise rates costs savers £600m a year. Banks have been accused of giving savers a raw deal after analysis found that nine out of ten did not pass on last year’s interest rate rise in full. ...costing Britons an estimated £600 million a year in lost interest. Teachers Building Society and Tesco Bank passed on the full 0.25% point increase to mortgage holders, but only 0.15% points to savers. A spokesman for UK Finance, which represents the banks, said: ... Andrew Ellson, The Times.
  • Apr.22.2018: The global financial system seems safer... but risks have just been moved from one bucket to another. As a result of the financial crisis, banks have been made much safer by being forced to hold more capital, and the quality of assets they hold has improved immeasurably. Banks hold a lot more govt bonds and the risky stuff has been passed on to the mutual funds. Indeed, some 50% of the assets in the financial system are now held by savings vehicles such as mutual funds. The danger is that the risks have just been moved from one bucket to another and that mutual funds may be even less able to weather the storm than banks. Be worried, very worried. Alex Brummer, This is Money.
  • Mar.15.2018: Small firms say no to bank loans. Small businesses are turning their backs on bank debt, deepening concerns over stagnating productivity and faltering economic growth. In the latest blow to lenders' battered relationships with small and medium-sized companies, the UK's largest survey of attitudes towards access to finance has revealed that almost half of businesses describe themselves as "permanent non-borrowers"... Experts warned the dramatic long-term shift in attitudes could ultimately harm companies' ability to keep up with international competitors and tackle weak export performance. Kevin Hollinrake said it was lack of trust. Suren Thiru, head of economics and business finance at the British Chambers of Commerce, said the main issue was lack of competition. RBS, Lloyds, Barclays and HSBC control more than 80% of the small business market. A Competition & Markets Authority investigation in 2016 found that loan pricing was opaque and bank switching weak. (see David Jones Comment) The Times, James Hurley
  • Mar.07.2018: "Crystal methodist" Co-operative bank chairman Paul Flowers given financial services ban. Paul Flowers, the disgraced former Co-operative Bank chairman, was banned from working in financial services yesterday because he used company property to ring premium rate phone lines and send sexually explicit emails. The Financial Conduct Authority (FCA) issued the ban almost 5 years after Flowers, a former Methodist minister, quit the bank in 2013 after it revealed a £1.5 bn hole in its balance sheet. Shortly afterwards he was dubbed a "financial illiterate" by MPs and filmed allegedly buying drugs. The Times, Patrick Hosking
  • Mar.06.2018: Alarm was raised about failed broker. The City watchdog the Financial Conduct Authority was warned last summer that Beaufort Securities, failed City broker that faces fraud charges in the USA, was not acting in the best interests of its 14,000 clients. Richard Jennings, a financial adviser, director of the Shipley-based Align Research. Complaints on the Financial Ombudsman Service website detail allegations that Beaufort sold clients shares that it held on its own account acting as "principal" without them knowing they were buying from it. The Times, Harry Wilson, Alex Ralph
  • Feb.23.2018: The Guardian view on Labour and banks: not casino capitalism. Jeremy Corbyn made a speech criticising big finance and got called a communist. But the Tories appear to have nothing to say about the economic crisis of our times. Kwasi Kwarteng, aide to Chancellor Philip Hammond, accepted that the public were angry over the fact no bankers had gone to prison, but offered nothing but words. It was Labour's Jeremy Corbyn who offered an analysis and an answer: that banks were not supporting productive investment but "lending to households and inflating asset prices on a scale never seen before". Mr Corbyn was right to argue that "deregulated finance has progressively become more powerful. Its dominance over industry, obvious and destructive; its control of politics, pernicious and undemocratic”. Similar ideas, more gently expressed, have been aired by the Bank for International Settlements, which in 2015 said there was a "pressing need to reassess the relationship of finance and real growth in modern economic systems". Mr Corbyn's honesty earned him absurd headlines about turning the "City into the last Soviet-era capital west of Pyongyang". The Guardian, Editorial
  • Feb.07.2018: Takeover frenzy: Investment banks rake in record $104bn in fees. Fees hail from $3.5tn worth of takeovers including 21st Century Fox-Disney deal and Amazon takeover of Whole Foods with 2018 billed as even bigger year. Globally, banks billed their clients for $103.9 bn worth of fees for their work, a 16% increase on 2016 and the highest yearly total since Thomson Reuters began collating data in 2000. The Times, Rupert neate
  • Sept.2015: How Wall Street’s Bankers Stayed Out of Jail. The probes into bank fraud leading up to the financial industry’s crash have been quietly closed. Is this justice? Without holding real people on Wall Street accountable for their wrongdoing in the years leading up to the financial crisis, the message that their behavior was unacceptable goes undelivered. Instead a very different message is being sent: for financiers, justice is just a check someone else has to write. The Atlantic, William D. Cohan
  • Apr.17.2011: Yet again, a chance to rein in the bankers has been squandered. It seems we have learned nothing from the financial crisis and are willing to let the City carry on as it likes. A £1.3trn bank bailout, a financial disaster that has lost Britain 20% of its GDP and threatens years of subdued growth should surely have triggered anger and some real change. But after the publication of Sir John Vickers's Independent Commission on Banking interim report, the chance is receding before our eyes. The Guardian, Will Hutton