FCA launches review into RBS's small business lending

Britain's financial regulator has appointed two outside firms to review part-nationalised Royal Bank of Scotland's treatment of struggling small business customers.

RBS, which is 82-percent owned by the government, has been accused by government adviser Lawrence Tomlinson of pushing struggling small firms into its Global Restructuring Group (GRG) "turnaround" unit, so it could charge higher fees and interest, and take control of their assets.

The Financial Conduct Authority (FCA) said on Friday that consultancy Promontory Financial Group and Mazars, an accounting firm, will conduct the independent review which will be paid for by the bank.

The review will consider allegations of poor practice set out in two reports, and publish its findings in the third quarter.

"The review will also consider whether any poor practices identified are widespread and systematic. If this is the case, the second stage of the review will identify the root cause of these issues and make recommendations to address any shortcomings identified," the FCA said in a statement.

Jon Pain, head of conduct and regulatory affairs at RBS, said that in addition to the FCA's review the bank has commissioned lawfirm Clifford Chance to further investigate loans to business customers.

"Any customer with concerns about their experience with GRG can contact Clifford Chance to have their case examined," Pain said.

The FCA said that while commercial lending is not a regulated activity, if the findings reveal issues which come within the FCA's remit it will consider further regulatory measures.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

Bank customers unable to calculate overdraft fees, Which? research finds

Call to force banks to make it easier to compare overdraft fees and other current account charges

Bank customers have no idea how to calculate overdraft charges, according to research by consumer body Which?. It is now calling on the government to force banks to make it easier to compare current account fees.

Which? asked a group of bank customers to work out the total cost of using an unauthorised overdraft at each of the 12 biggest banks. Despite being given access to all the banks' websites, few of those tested could correctly calculate the true cost of going overdrawn once interest and other fixed charges were added to any daily fees or penalties for unpaid transactions.

Across the group of customers tested, just 10 of the 72 calculations were made correctly. A principal inspector of taxes was right on only one of four calculations, while a retired headteacher got all his answers wrong. Only six of the 18 volunteers thought that a typical consumer would be able to compare the charges.

Which? executive director Richard Lloyd said true charging transparency would encourage more people to switch accounts.

"Consumers are faced with a myriad of complicated charges for using an unauthorised overdraft, and it's virtually impossible for people to calculate and compare the cost of running a current account. To boost competition we want the government to make banks release data about how customers use their accounts so it's easier for them to work out charges and rank providers by cost."

Which? says this data could be used to develop comparison tools that would allow consumers to rank providers according to their financial situation.

British Bankers' Association's director Eric Leenders played down the Which? findings, saying the banks already help customers to compare account charges.

"All the major banks also make information about customers' current account use available to them in a downloadable format as required by the government's initiative to encourage transparency."

He said overdraft charges have plummeted since 2008, with estimated consumer savings of up to £928m over the past five years.

Earlier this week it emerged that more than 300,000 people switched current accounts in the final three months of 2013, up 17% on a year earlier.

The Payments Council, the body responsible for payment services which published the numbers, said it marked an "encouraging start" for its seven-day account switching service, which was launched in September. However, Which? has reported that two-thirds of people who moved accounts had problems, while more than a quarter said it took eight working days or more.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

Bank of England holds cards close to chest on guidance options

 The Bank of England kept investors guessing on Thursday as to whether it might be considering a change to its pledge to keep interest rates on hold as Britain's economic recovery picks up.

It also did not take the unusual step - but one which some investors had considered possible - of issuing a statement to address the speed at which Britain's unemployment rate is falling towards its threshold for considering a rate hike.

"No guidance on guidance yet," Investec economist Philip Shaw said in a note to clients. He said details of discussions among the BoE's policymakers on their options for changing guidance were likely to appear when minutes of this week's meeting are published on January 22.

Britain moved from being a laggard to a leader in terms of growth among the world's biggest economies last year.

Its economy is expanding by more than 3 percent in annualised terms although there are concerns the recovery could prove unsustainable, especially as wage growth remains weak.

The BoE said in August it will not think about raising rates until unemployment falls to 7 percent. Since then unemployment has come down much faster than the Bank expected, raising questions about how long it can hold off on raising rates.

But inflation has also fallen to within a whisker of its 2 percent target, reducing the pressure on the BoE.

After its two-day meeting, the Bank's Monetary Policy Committee kept interest rates at 0.5 percent, as expected by all the economists who took part in a Reuters poll.

It also left its bond-buying programme unchanged at 375 billion pounds.

The turnaround in Britain's economy contrasts with the situation in the euro zone, its main trading partner, where the European Central Bank is expected to use a news conference on Thursday to remind investors it could ease policy further.

The pace of Britain's recovery has helped the pound to strengthen by 5 percent against the euro and 10 percent against the dollar since the middle of last year.

Sterling strengthened briefly against the dollar after the MPC's announcement of no change in policy. British government bond prices rose slightly.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

RBS risk fuelling pay row as it considers how to avoid EU bonus cap

Bank which is 81% owned by taxpayers is keen to keep pace with Barclays and HSBC, which plan to hand out 'allowances'

Royal Bank of Scotland risks fuelling the row over pay as it considers how to follow rivals that have devised ways to avoid the EU bonus cap and maintain their bankers' multimillion-pound pay cheques.

The 81%-taxpayer-owned bank is keen to keep pace with rivals such as Barclays and HSBC, which are both planning to hand out new allowances, which are not classed as salary and therefore do not get included in the calculations used in the bonus cap. They have been introduced to ensure bankers do suffer any reduction in pay as a result of the bonus cap being imposed by Brussels.

Data published by the European Banking Authority last year showed that the average banker based in London received a bonus of 370% times their salary – indicating the impact that the bonus cap would have on pay.

Labour on Wednesday blew open the debate on the bonus cap, which came into effect at the beginning of this year and which George Osborne opposes. The cap limits the bonuses of the most senior bankers to 100% of their salary, unless the bank that employs them wins specific approval from its shareholders to pay bonuses of 200%. Labour called on the government to clamp down on bonuses at the loss-making, bailed-out bank and use its 81% stake to ensure that none of the RBS bankers will get 200% bonuses.

RBS admitted on Wednesday night it was consulting shareholders about pay, but insisted no decisions had yet been made.

All the major banks are expected to ask their shareholders for permission to pay bonuses twice the size of their top bankers' salaries at their upcoming annual general meetings. They are also looking at ways to pay their staff even more by making payments in addition to their salaries.

HSBC, for instance, is ready to hand out share awards to 1,000 or so of its more senior staff alongside their salaries and annual bonuses. Barclays also intends to hand its investment bankers monthly allowances to maintain their overall level of pay.

The other bailed-out bank, Lloyds Banking Group, is also expected to seek approval to pay out bonuses of twice salaries and look at ways of maintaining pay levels by using some form of additional payment. Such a move would also require approval from UK Financial Investments, the body that controls the taxpayer's stake in the bailed-out banks and still owns 33% of the shares after selling off a tranche last year.

Vince Cable, the business secretary, called on RBS to show restraint and urged it to consider the business models used by other banks that do not pay bonuses. He cited the Swedish bank Handelsbanken, which does not pay bonuses and instead uses a profit-sharing system called Oktogonen, which pays out when individuals turn 60.

"What I would say to RBS is they need to show restraint. They are changing their overall banking strategy. Instead of being a global bank aimed at investment banking they're now thinking about being a British bank aimed at British customers and British business. They should look at other models like Handelsbanken, in Sweden, which is very successful and has branches in Britain and doesn't have any bonuses at all," Cable told ITV.

Handelsbanken's UK offshoot has been unable to make Oktogonen allocations to staff for the past three years because of a dispute with HM Revenue & Customs about whether it is disguised remuneration – pay that is not being taxed.

The business secretary insisted that the government had not yet seen any proposals from RBS about its plans to tackle the bonus cap and referred to remarks by David Cameron warning about the bonus rules leading to increases in salaries to allow staff to receive the same amount of money.

"I think that's a legitimate concern that we can take into account,' Cable said.

"Most banks will be trying to get the cap lifted to 200%," said Greg Campbell, employment partner at the law firm Mishcon de Reya. Campbell said there had already been major changes to pay, when in the past bonuses across the City might have been as large as 10 times salary.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

World Bank: Global economy at turning point

The global economy is at a "turning point",the World Bank has said, as it forecasts stronger growth for 2014.

In its annual report on the world economy, the bank said richer countries appeared to be "finally turning a corner" after the financial crisis.

That is expected to support stronger growth in developing economies.

But it warned growth prospects "remained vulnerable" to the impact of the withdrawal of economic stimulus measures in the US.

The US Federal Reserve has already begun to wind down its monthly bond-buying programme, previously set at $85bn (£52bn) a month.

'Crisis risks'

There is concern this could push up global interest rates, which could affect the flow of money in and out of developing countries and lead to more volatile international financial markets.

The World Bank warned that some developing countries "could face crisis risks" if the unwinding of stimulus measures was accompanied by market volatility.

"Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery," said World Bank group president Jim Yong Kim.

"The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets."

The bank forecasts that global GDP will grow by 3.2% this year, up from 2.4% in 2013, with much of the pick-up coming from developed economies.

Developing nations will grow by 5.3% this year, up from 4.8% in 2013.

In an interview with BBC economics correspondent Andrew Walker, World Bank economist Andrew Burns acknowledged that Brazil, Turkey, India and Indonesia were among the countries that could be vulnerable to the impact of US stimulus withdrawal.

However he also noted that the first concrete steps taken by the Federal Reserve to cut back its programme of buying financial assets last month did not severely disturb the markets.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

Inflation finally falls to Bank of England's 2% target

Surprise drop in December hits mark for first time in four years, helped by a smaller rise in food prices and early sales discounts

Inflation unexpectedly fell in December, returning to the Bank of England's 2% target for the first time in four years.

A smaller rise in food prices compared with a year earlier offset a rise in petrol prices and the well publicised increases in gas and electricity bills. High-street discounting in the weeks before Christmas also helped lower the inflation rate, economists said, with toy and computer game prices falling .

The surprise fall drove the consumer prices index to its lowest level since November 2009, when it stood at 1.9%, the Office for National Statistics reported. Inflation has fallen sharply since June's high of 2.9%, and economists had expected it to remain unchanged last month at November's 2.1%.

Chris Williamson, chief economist at Markit, said inflation was likely to remain "close to, if not below, the 2% target for some time to come".

The fall in CPI inflation will be a source of relief for the Bank's monetary policy committee, under pressure to justify its ultra-loose policy stance despite economic growth and falling unemployment in recent months.Interest rates have been on hold at an all-time low of 0.5% since March 2009.

"Talk of higher rates has increased in recent weeks because the Bank of England has been wrong-footed by the strength of the economy," Williamson said.

A Treasury spokesman said the fall was "another sign that the government's long-term economic plan is working".

He added: "But the job is not done and times remain tough for many people. So an important part of the government's plan is helping hard-working people be more financially secure by increasing the tax-free personal allowance and freezing fuel duty and council tax."

Consumers will be hoping that lower inflation will raise the prospect of higher wages, which have been persistently outpaced by rising prices.

Catherine McKinnell, the shadow economic secretary to the Treasury, said that for now, household budgets in Britain remained under pressure: "This small fall in the inflation rate is welcome, but with prices still rising more than twice as fast as wages the cost of living crisis continues. After three damaging years of flatlining, working people are on average £1,600 a year worse off under the Tories."

Average annual wage growth, in the three months to October – the latest official data – was up 0.9%. The retail prices index, more broadly based than CPI and often used as a guide for wage bargaining, rose to 2.7% in December from 2.6% in November.

John Allan, national chairman of the Federation of Small Businesses, said December's fall in CPI inflation was a welcome relief for hard-pressed households and businesses. "With the economy now growing, our members will be pleased that pressures on the cost of doing business are easing, though some concerns over rising fuel and in particular energy costs remain," he said.

Consumer price inflation averaged 2.6% in 2013, the lowest since 2009 and down from 2.8% in 2012. The December inflation data confirmed the trend of easing food price inflation – driven by lower prices for food and meat – highlighted last week by the British Retail Consortium.

The BRC said food price inflation slipped to a three-year low in December, while overall shop prices fell for the eighth month running in December.

With deep discounting as shops battled for hard-pressed customers the drop in prices of 0.8% on a year earlier was the deepest deflation since the BRC's data began in December 2006.

Andrew Sentance, senior economic adviser at PwC, said the challenge was to keep inflation on target.

"Stronger growth here in the UK could push up wage costs and a rebound in the global economy is likely to push up energy, food and commodity prices once again. So we cannot be sure that this return to the inflation target will be sustained through 2014," said Sentance, also a former member of the Bank of England's monetary policy committee.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

New London finance jobs rise for first time since early 2012

The number of new financial services jobs in London rose for the first time in almost two years last month, research showed on Monday, which recruiters said was a sign that banks are starting to think about growth after years of restructuring.

However, the number of jobs created in the whole of 2013 fell 21 percent compared with the year before as the financial jobs market still struggles to recover from the effects of the financial crisis, after which a number of banks cut jobs or pulled back from certain activities to reduce costs.

In December, 1,340 new jobs were created in the City financial district, up by two thirds versus the same month in 2012, according to research by recruitment firm Astbury Marsden. It was the first time in 22 months there had been a year-on-year monthly increase, the study said.

Investment banks created 67 percent more jobs than in December 2012.

Astbury Marsden said steady trading volumes encouraged City firms to continue to support growth in equity and derivatives trading and a buoyant shares listings market encouraged banks to devote more resources to deal-making and execution teams.

The total number of roles created in 2013 fell to 27,915 from 35,115 created in 2012, the research showed.

Astbury Marsden said there were some positives to be taken from the fact that the rate of shrinkage had slowed, however, as total new roles in 2012 had been 35 percent behind 2011.

"What we are seeing is very far from a return to aggressive hiring, but it is a good sign that banks are thinking again about growth," Astbury Marsden's Chief Operating Officer Mark Cameron said.

Separate research released last week suggested financial services institutions are finding it increasingly difficult to find the right staff to fill roles and to keep top talent on board.

TALENT BATTLE

In a survey conducted as part of recruitment firm Robert Half's Salary Guide for 2014, almost all of the 100 executives asked said it was a challenge to find skilled financial services professionals and 95 percent said they were concerned about losing top performers.

A similar number said they were worried about losing top talent to international competitors as a result of the European Union bonus cap, which limits bonuses to no more than annual salary, or twice that with shareholder approval.

Bonuses and executive compensation are particularly thorny issues in Britain, where many believe high levels of pay encouraged the excessive risk taking that led to the financial crisis.

People struggling in the economic downturn have been infuriated by companies, particularly banks rescued by the government at the height of the crisis, which continue to award payouts many times the average wage.

Robert Half said almost two thirds of firms surveyed had already raised salaries by an average of 19 percent for top employees to counteract the crimp on bonuses, while six in 10 have also increased benefits for affected staff.

In November Barclays (BARC.L) unveiled a plan to give senior bankers additional monthly payments and last week an industry source said HSBC (HSBA.L) is considering handing out new share awards to around 1,000 top-ranking staff.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook