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The RBS department set up to help companies in trouble mistreated many of its clients, a leaked report for the Financial Conduct Authority says.

It found some “inappropriate action” – such as interest charges being raised or unnecessary fees added – was experienced by 92% of viable firms seen by RBS’s Global Restructuring Group.

GRG operated from 2005 to 2013 and at its peak handled 16,000 companies.

The banking giant denies systematic abuse of its customers.

GRG would step in when businesses had skipped a loan repayment, or seen their sales and profits dip notably and was marketed as an expert service that would turn around a business.

But the report, seen by the BBC, commissioned for the City watchdog, the FCA, found struggling companies that were placed in the recovery group had a slim chance of emerging from it.

It said just 10% returned intact to the main RBS bank.

As of the end of 2014, 69% of firms, were still in the successor to GRG, which was supposed to return them to health.

‘An undertaker’

Many of those businesses remained tied into complex loans with the bank in the form of derivatives linked to interest rates, from which it is often too expensive to leave.

Others ended up in administration, liquidation or a trade sale. According to one BBC source, instead of getting firms back on their feet, GRG was more like their “undertaker”.

The 361 page leaked report also says the bank provided only “narrow compliance” to investigators.

Sources told the BBC investigators would regularly ask for details from the bank on certain matters and RBS would only provide the absolute minimum information.

RBS disputes this though. It says it provided investigators with “circa 323 gigabytes of data, comprising more than 15 million physical pages and 270,000 emails.”


Tenth of young adults shun cash, says UK Finance

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A tenth of young adults shun cash and rely instead on cards and digital payments for their day-to-day spending, figures suggest.

More than one in 10 people aged between 25 and 34 used notes and coins no more than once a month last year, according to UK Finance.

The trade body for financial providers said nearly three million people rarely used cash.

But, across all age groups, cash remains the most popular way to pay.

The figures show that 6% of the UK’s adult population used cash no more than once a month last year, but this increased to more than 10% for 25 to 34-year-olds. The proportion drops to 2% for 55 to 64-year-olds.

At the opposite end of the scale, 5% of the UK adult population (2.7 million people) relied almost entirely on cash to make their day-to-day payments during 2016, UK Finance said.

This was relatively evenly spread across different age groups. However, people with lower household incomes were far more likely to rely mainly on cash compared with their more affluent counterparts.

More than half of all consumers who relied predominantly on cash during 2016 had total household incomes of less than £15,000 per year.

Cash accounted for 44% of all payments made by consumers across the UK last year.


Lloyds under fire over HBOS fraud compensation

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Lloyds Banking Group has said it is close to offering compensation to 30 customers caught up in a criminal conspiracy involving former bankers at its HBOS subsidiary.

The bank has already missed its own deadline of 30 June for paying redress to all victims. So far, only five have accepted compensation offers.

MPs and victims have criticised the compensation scheme.

The fraud saw small businesses pressed into hiring “turnaround consultants”.

Two corrupt HBOS bankers pressured the customers into using consultants Quayside Corporate Services, led by David Mills.

He and his accomplices bribed the bankers with cash, gifts and prostitutes, then used their relationship with the bank to bully the business owners into handing over exorbitant fees and, eventually, control of their companies.

The business customers, in the words of a judge, were left “cheated, defeated and penniless”.

‘Progress’

After bad publicity following the fraudsters’ convictions in February, Lloyds chairman Lord Blackwell said compensation claims would be handled “within weeks, not months”.

On Friday, the bank published an update on its compensation, saying it was “close to” making 30 offers.

Adrian White, chief operating officer for commercial banking and the man leading the review, said: “We are now continuing to make progress in getting offers to victims of the HBOS Reading fraud. We have now either made offers or are in the detailed assessment stage for nearly half the victims in the review. It is important we get the fullest possible information from victims to ensure we can factor in everything that could contribute to their compensation offer.”

But so far only 16 compensation offers have been made – and many more were caught up in the fraud.

The banker at the heart of the fraud, Lynden Scourfield, was in charge of supervising accounts for more than 250 small business customers.

Unsettled

Victims of the fraud have criticised the bank for seeking to dictate the terms of its compensation scheme rather than seek their approval.

They were not asked to agree the bank’s appointment of Professor Russel Griggs to review its compensation offers.

They have also been unsettled after a senior Lloyds executive claimed the bank had no evidence of criminality until the fraudsters’ trial began in 2016.

The small business customers who uncovered the fraud, Paul and Nikki Turner, sent detailed allegations of fraud to the board of HBOS in 2007, attaching documentary evidence later used in the 2016 trial.

They sent further evidence to every member of Lloyds’ board in 2009. At the time Lloyds dismissed their evidence and instead spent large sums on lawyers seeking to evict the Turners.

Concern

It has also emerged that Lloyds conducted internal reviews into the conduct of Mr Scourfield and others as far back as 2006.

In April, Lloyds Banking Group appointed Dame Linda Dobbs, a former high court judge, to review the bank’s handling of the fraud, which took place from 2002-2007, in the years before the trial in 2016.

During this time the bank consistently refused to say anything in public or acknowledge criminality. However, victims of the fraud have not yet been contacted in relation to the review.

MPs say they’re concerned the bank’s compensation scheme lacks transparency and independence. The bank will not show victims who is deciding their compensation offer, or reveal how it is worked out.

‘Suspicion’

Lord Cromwell, chair of the all party parliamentary group on fair business banking, said: “There appears to be a lack of transparency, and therefore a lack of public confidence, in the processes set up unilaterally by Lloyds for assessment and settlement of claims.

“Inevitably this creates suspicion and we are hoping that Lloyds will now accept our repeated invitations to make the processes – including the nuts and bolts of valuing claims – far more open to assessment by victims and their advisers. Without that it is hard to see how this matter can end other than in bitterness and litigation.”

Shadow business minister, Bill Esterson, said: “The victims of the HBOS Reading Fraud deserve to be treated in a fair and transparent manner. It is clear from the concerns that have been raised with me that this is not happening, and the Bank must be held to account.

“Any process of compensation must be transparent and beyond reproach, yet the details of the scheme as described to me provide no comfort that this is the case.

“Businesses in the UK deserve to have confidence that we are doing everything we can to support them when things go wrong, and it appears to me that there is a massive systemic failure when Banks are allowed to be their own judge, jury and executioner behind closed doors. This must change.”


Brexit: EU to give UK banks new incentive to leave London, say officials

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European Central Bank may fast-track applications from British finance firms looking to move

Banks in London that relocate operations to the euro zone after Brexit are likely to be spared a lengthy entry test by regulators, making it easier for them to shift, according to two officials with knowledge of the matter. The European Central Bank, the euro zone’s banking supervisor, has had many inquiries from British-based banks wanting to come under its watch, prompting it to look at fast-tracking licence applications, according to the sources. It is set to temporarily waive an examination of the financial models that big retail lenders and investment banks use to determine the risk of a default on a mortgage or derivative – as long as the banks meet the standards of British regulators, they said.

Any such decision by the ECB would be chiefly for practical rather than political reasons and would, said one of the people, aim to minimise disruption to European finance after Britain leaves the EU. “Resources are limited. We would find a way of doing [applications] quickly,” said the official, talking on condition of anonymity because of the sensitivity of the matter. “The European financial system wants to continue to function.”Such a waiver would nonetheless serve to speed up banks’ relocation plans and help reshape Europe’s financial landscape by expediting the process of Frankfurt, Paris, Luxembourg and Dublin winning business from London.

The ECB declined to comment.

Prime Minister Theresa May will trigger divorce proceedings with the EU on 29 March, launching two years of negotiations that will help determine the future of Britain and Europe. While the final terms for doing business with the EU from Britain are uncertain, May has made it clear that Britain will leave the single market which allows banks in London to sell their services across the bloc. Finance executives say privately they expect Brexit to isolate London, currently Europe’s financial capital, and want to establish bases inside the EU from where they can access its market. Dublin has received 80 such inquiries from financial institutions including banks, according to IDA Ireland, an agency that attracts foreign investment, while about 50 envoys from foreign banks met Germany’s watchdog earlier this year about a possible move.

Grace period

The final decision in granting a banking licence in the euro zone is taken by the ECB, which looks at the strength of a bank’s capital as well as that of its management when it comes to granting approval. But, according to the sources, it is set to waive the immediate examination of the financial models which contain the basic assumptions underpinning a bank’s business and are essential to understanding their riskiness – a process that can take more than a year.

The waiver would be based on the principle that the Bank of England‘s checks are good enough. It would only be a temporary reprieve, however, to smooth the relocation process, and banks would eventually have to face testing of their models. The sources said the period of grace could last several months.

“It is reasonable to decide that there is an interim period where these models are accepted,” said the second official. A decision by ECB officials on the waiver is expected in the coming months. Leading financial firms in Britain warned for months before last June’s Brexit referendum that they would have to move some jobs if there was a leave vote, and have been working on plans for how they would do so for the past several months.

Senior European officials have also become increasingly nervous, privately warning of a “cliff-edge” departure of Britain from the bloc. The EU is heavily dependent on London for trillions of euros of finance and a massive pool of investors. France and Germany are keen to establish alternatives  to London, while smaller countries, such as Ireland and Luxembourg, are also vying for their share of the spoils. Flexibility in terms of entry requirements could help a bank such as Goldman Sachs, which sources have said want to build up its business in Frankfurt. The Wall Street firm’s European chief executive said on Tuesday it will begin moving hundreds of people out of London as it prepares for Britain to leave the European Union.


Bank cheques to be cleared within a day

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Bank customers who pay cheques into their accounts will soon be able to get the money cleared within one working day.

At the moment, the process can take up to six days. The organisation that manages the cheque clearing system said the changes would be phased in from October 2017. However, it will be the second half of 2018 before all UK banks and building societies are able to offer the faster service.

Under the new arrangements, co-ordinated by the Cheque and Credit Clearing Company, banks will be able to clear cheques by exchanging pictures of them. At the moment, all cheques have to be physically transported back to the bank that issued them. “These changes will put cheques firmly in the 21st century, delivering real and important benefits for the many individuals, charities and businesses that regularly use cheques,” said James Radford, chief executive of the Cheque and Credit Clearing Company. “Not only will cheques clear faster but banks and building societies may offer their customers the option of paying in an image of a cheque rather than the paper cheque itself.”

Barclays already allows some of its customers to pay in cheques via pictures on their banking apps. However at the moment they have to be cheques issued by Barclays. Although cheque use has declined in recent years, there were still 477 million written in the UK last year. The industry had wanted to phase them out entirely by 2018. However MPs said they should be retained, as many older people in particular relied on them.


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