Tag Archives: Mis Sold Ppi

The British Banking Sector : From PPI to Frankfurt

The British banking sector has long trumpeted the values and virtues of being part of the EU.

Setting aside the banking, bureaucracy, and regulatory red tape set out endlessly by Brussels, one very significant point was that the big banks could have their regional of global headquarters in the City of London, and from there have their subsidiaries throughout Europe. As such, setting up a regional, international headquarters in the City has for a very long a time been very attractive to large, multinational banks. This in turn meant that the large scale financial activity in the City of London brought great benefits to the UK banking sector, and the UK economy overall. This is part of the banking concept of “passporting.” Essentially, a financial institution or bank can set up in the UK, and be able to serve clients across the European Union, and not need to get further banking licences.

Now that Prime Minister Theresa May has stated her intention to trigger Article 50 just before April – that lucrative situation for the City of London is under threat.

It was always a concern that banks might consider relocating to other countries in Europe following Brexit, taking millions (billions, maybe?) of pounds of financial revenue with them. With such a relocation, the valuable passporting rights would be preserved throughout the rest of the EU – and would erode at London’s status as a global financial hub.

Fuelling such uncertainty and potential economic damage, in October 2016 head of the Deutsch Bundesbank (German Central Bank) Jens Weidman stated that that would indeed be the case in the event of a “hard Brexit.” In an interview with the Guardian, Herr Weidmann stated that those passporting rights were “tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area.” He hinted that banks would probably seek to relocate to other financial hubs in the EU, stating that as “a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers. But I don’t expect a mass exodus from London to Frankfurt.”

Frankfurt: The New Square Mile?

Frankfurt: The New Square Mile?

With the Brexit negotiations now starting, passporting is one of a very long list of subjects sensitive to both sides that will be under detailed discussion. For the UK banking sector, it is but the latest in a long series of issues over the last decade or so.

The turn of the millennium saw a new and aggressive era in banking. This ultimately ended with the crash of 2007/8. The impact of that era is still being felt today, and has seen already seen the demise of one financial regulator, the Financial Standards Authority. Its successor since 2013 has been the Financial Conduct Authority (FCA). The FCA has been kept very busy with historic cases of excesses, and has imposed record and very public fines and sanctions (such as against the Swinton insurance group) as a very visible deterrent to other financial institutions. However, in setting new rules, and in being an effective regulator for current issues, many consider that the FCA lacks teeth. Indeed, few bankers have actually been imprisoned for effectively breaking the law, and committing financial crimes.

There is no doubt that past misdemeanours have been exposed, with financial institutions being called to account (the Libor or rate swap scandal being a good example). Indeed, one of the greatest scandals was the PPI scandal. Millions were mis sold PPI insurance throughout the 1990’s and early millennium. Banks have been fined, and ordered to make repayments and compensation payments to those affected. In 2017, PPI repayments are still being made, claims and cases are still ongoing, with the major banks setting aside even more money to settle the scandal. The total bill for mis sold PPI is set to be well in excess of £20 billion – probably nearer £30 billion.

Mis sold PPI and Libor are very much scandals of the past, though. Those past excesses are being settled and resolved now. The current issue for the UK banking sector is not one of its own making – passporting and Brexit.

It is no secret that many big UK based banks and international financial companies are considering relocating from the UK. Names ranging from HSBC to Deutsche Bank have all previously made noises that they could relocate depending on the result of Brexit negotiations. Although this will not cost them anywhere near as much as the Libor and PPI fines, the price for relocating will be hefty – as will the losses to the UK economy.

Times change – but the banking sector seemingly does not. Ten years ago, the banking sector was manipulating customers to ultimately charge them more money. Today, the banks will still (potentially) cost the British public money; the only difference is that this time this will be due to lost revenue at overall detriment to the economy, and not due to the excesses of bankers.

It is only financially sensible for the big banks to seek a financial and competitive advantage by relocating to take advantage of passporting rights. That is also the responsible thing to do in line with their fiduciary and shareholder responsibilities. However, such big banks should also consider the impact of any relocation upon the UK financial sector and economy overall.

Many, however, remain optimistic that such a relocation is unlikely. As the Brexit negotiations start, it is to be hoped that that is indeed the case.

Mis-sold PPI and its Repercussions

In the past couple of years, numerous cases of mis-sold PPI have been uncovered leading to an enormous spurt in claims for PPI refunds. PPI or Payment Protection Insurance covers the credit card payments or loan payments in case of sickness, accident or unemployment. You may have also been mis-sold the policy without your knowledge.

Considering PPI Claims

If you look into the PPI basics, you will find that the policy is in essence a good one, but due to the wide mis-selling, hundreds of people are left without any cover. And this even happened in spite of paying a huge amount in monthly premiums. The cost of the insurance is large, and dwarfed the interest thus leading many people to think of it as an expensive affair.

Cause for Mis-selling

The financial providers were under huge stress to increase the sales of PPI which forced them to mis-sell thus leading to the PPI fraud. You could have avoided getting embroiled in the PPI scam if you had known whether you really need to have a PPI while taking the policy.

Standalone PPI

If you have taken a PPI policy along with a loan or mortgage, the provider should let you cancel the insurance. If you do need a PPI, you should get it as standalone insurance and cancel the PPI you purchased along with the loan to save money. A PPI calculator will help you know the exact amount of money you need to pay.  You get to save money with a standalone policy because the commission money will be reduced. With a standalone factor, you need to cover only one third amount of the cost.

If you have been mis-sold, you can lodge a PPI complaint with the concerned provider, or get assistance from the Financial Ombudsman Service. PPI help can also be obtained by approaching PPI claim companies, such as www.oraclelegal.co.uk.  With the High Court judgment being made in favour of the consumers, PPI claims should be dealt with in a fair manner now.