Independent Banking Advisory Service 

Banking News 2012

Pressure growing for three more ex-RBS directors to be stripped of their knighthoods - The pleas came just 24 hours after the bank’s former chief executive, Fred Goodwin, had his honour shredded. Sir Tom McKillop, Sir Stephen Robson and Sir Peter Sutherland were all on the RBS board as it hurtled towards disaster under Goodwin’s leadership. John Mann, a Labour MP who sits on the Treasury Select Committee, said: “The precedent has been set. It wasn’t Fred Goodwin on his own who caused the problems. He was part of a team of people.”

Eddy Weatherill, chairman of the Independent Banking Advisory Group, added: “These people were sleeping while Fred drove the car over the cliff. “You can’t blame one man. It’s like a football or cricket team. He may have been the captain but there were plenty of other players picking up their cheques.” Mr Weatherill is concerned the decision to strip Mr Goodwin of his title would act as a smokescreen. He said: “The danger is he becomes the scapegoat. There’s a bit of blood letting to satisfy the mob and then everyone can get back on the gravy train.”

The Financial Services Authority report on the collapse of RBS, published in December, was highly critical of Mr Goodwin’s management style. While it stopped just short of labelling him a bully, it found him “cold, analytical and unsympathetic”. And it criticised the rest of the board for failing to challenge him, resulting in “strategic mistakes being made”.

Sir Tom McKillop was chairman of RBS from 2006 until 2009. He failed to prevent the catastrophic takeover of Dutch bank ABN Amro, which brought RBS to its knees. The 68-year-old was also a director of Lloyds Banking Group between 1999 and 2004. He was knighted in 2002, for services to the pharmaceuticals industry during his time at drugs company Zeneca.

Sir Stephen Robson, an RBS board member between 2001 and 2009, also sat on his hands during the Goodwin goldrush. He was a senior civil servant until 2001, playing a key role in the privatisation of the railways. He was also instrumental in developing the public private finance initiatives which have landed taxpayers with mammoth bills for building and running hospitals. He is on the board of the Financial Reporting Council, which advises on the way firms should be run and best practice for reporting firms’ financial affairs. He is also a part-time director of Xstrata and chairman of the Public Interest Committee at accountants KPMG. Interestingly, his career details on the organisation’s website make no reference to his time at RBS.

The third culprit is City grandee Sir Peter Sutherland, who sat on the RBS board for eight years until 2009 bail-out. A former Attorney General of Ireland, he was awarded an honorary knighthood in 2004. He served as chairman of BP until retiring in 2009 but remains chairman of Goldman Sachs International, part of the US investment bank. He was also made a director of the London School of Economics despite an online petition opposing his appointment. - Daily Mirror  02/02/12

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Call this justice? City banker steals £1.4m... no charge. Shop worker steals £10k... 9 months' jail - Vast payouts are clearly not the only bonus you get being a fatcat banker – you also apparently get away with fraud scot-free. A City firm was yesterday accused of protecting a financier who stole £1.4million so he would not go to jail.

Ravi Sinha, 47, was fined nearly £3million by the City watchdog for fraud but escaped criminal prosecution after his company JC Flowers allegedly refused to help police nail him. In a shocking contrast exposing the double standards protecting the rich, a shop worker who allowed friends to steal £10,000 worth of goods – a fraction of what the banker took – was last year jailed for nine months.

City of London Police and JC Flowers yesterday blamed each other for the scandal – both accusing the other of having no appetite for prosecution. The extraordinary decision not to put Sinha before the courts was last night branded a disgrace. Sara George, a partner at law firm Stephenson Harwood, said: “The public will have difficulty understanding why a checkout girl who steals £10,000 from her employer should go to prison but a phenomenally wealthy individual who misappropriates millions should not.”

Labour MP Teresa Pearce added: “This is another example of the banks thinking they operate in what they believe is their own moral code which is different from the one everybody else has to live by. “ It’s inexcusable, it’s a good job he didn’t steal this money during a riot; he’d be in prison for the rest of his life.”

Sinha earned £886,000 a year, with potential bonuses of £1.3million, before he was busted for taking £1.4million by claiming bogus advisory fees after losing a fortune on private investments. He ran the European arm of US private equity firm JC Flowers from 2005 to 2009, when he was sacked after the firm discovered his scam. JC Flowers called in the Financial Services Authority to investigate. And the regulator banned Sinha from working in the industry for life, fining him one of the biggest penalties in its history for “very serious” dishonesty.

But when it passed its file to police a criminal prosecution did not follow. Under the Fraud Act, if convicted in court, Sinha would face between four and seven years’ prison. A police source said officers were very keen to prosecute him but dropped the case after his bosses refused to co-operate fully. A police spokesman said: “Having considered the matter, it was decided it would not be appropriate to take it any further.” But a police source said: “We spoke to JC Flowers and there was no appetite from them to support an investigation. However, a source close to JC Flowers dismissed the police claims and said the firm would co-operate if a prosecution is launched. He said: “If the police prosecute the company would happily assist, that’s always been the case.”

Eddie Weatherill, chairman of the Independent Banking Advisory group, was amazed Sinha was not being put before the courts. He said: “For some reason we often find there’s a real lack of determination to criminally prosecute bankers who have done wrong.”

David Fleming, Unite national officer, added: “It’s an utter disgrace for this wealthy banker to be walking away scot-free and avoiding any criminal investigation. “ Frontline workers in bank branches are constantly penalised and challenged on their conduct under the harshest of conditions. “ Why is it one rule for the rich bankers and another for ordinary staff?”

Tracey McDermott, of the FSA, said: “Sinha exploited his position of trust as CEO to fraudulently obtain significant sums for his personal benefit. “ He engaged in a dishonest, deliberate and sustained course of misconduct which lasted for several months. Such behaviour has no place in the financial services industry.”

JC Flowers stressed it had found the problem itself and the FSA had not criticised its systems or controls. A spokesman said: “Neither the company that paid the invoices nor investors in the funds advised by JC Flowers have suffered any loss as a result of Mr Sinha’s actions,” Last year, Ikea worker Colin Kenny, 20, was jailed for nine months for allowing friends and relatives to leave the company’s Belfast store without paying for £10,000-worth of goods. - Daily Mirror 02/02/12

Branson backtracks on his £60 bank fees after takeover of Northern Rock - Sir Richard Branson has dropped plans to impose compulsory fees of £60 a year on current accounts following Virgin Money’s takeover of Northern Rock. The U-turn comes after the proposed charges – even on customers who never stray into the red – were revealed by the Mail. Sir Richard now says his bank will offer the choice of free current accounts as well as the fee-charging accounts, which are likely to offer perks such as discounts on Virgin flights or gym memberships. Consumer groups say bank accounts offering these ‘benefits’ are usually poor value for money. Critics said that the billionaire’s back-tracking was a victory for the Mail.

Eddy Weatherill, of the Independent Banking Advisory Service, said: ‘It is good news that the Daily Mail has been pushing on this. ‘At the moment nobody trusts bankers. We need good standards of service and ethical behaviour to change that.’ Campaigners had feared that Virgin Money’s move would lead its rivals to follow suit and stop offering free accounts. Sir Richard said it would be ‘very unwise’ to offer only fee-charging current accounts and that Virgin would give customers a choice. Virgin Money is taking over 75 Northern Rock branches, 21,000 staff and a £14billion mortgage book. The enlarged bank will have four million customers. – Daily Mail 11/01/12

Bank with Branson? That'll be £60 a year - Sir Richard Branson’s Virgin Money bank is planning compulsory charges of about £60 a year for new current accounts, following the tycoon’s takeover of Northern Rock. Critics have accused the high street newcomer of plotting an Arthur Daley-style rip-off. The bank intends to charge every new customer about £5 a month – even if they never stray into the red.

Campaigners fear that rival banks will follow suit and stop offering free accounts. About a fifth of the UK ’s 54million current accounts already have charges - they typically offer benefits such as travel or mobile phone insurance – but consumer groups argue that most customers don’t want these perks, while those that do would save money by buying them separately. Virgin said its banking customers may receive discounts on Virgin flights, TV and internet subscriptions or gym memberships, although no final decisions have been made.

The firm said charging for current accounts would spread costs more fairly and lead to lower charges elsewhere. Virgin Money chief executive Jayne-Anne Gadhia said: ‘Most people know there is no such thing as free banking. Banks have to cover the cost of free current accounts with hidden charges such as overdraft fees.’ She confirmed that ‘we’re definitely planning to charge for current accounts’, but stressed that all fees would be ‘transparent’. The bank intends for its current account charges to be lower than those for competitors’ paid accounts, which range from £6 to £25 a month.

Eddy Weatherill, head of the Independent Banking Advisory Service, said the accounts, to be introduced next year, will be used to ‘kick-start the bank’s ability to make cash’. ‘We need new entrants to the banking market with new ideas,’ he added. ‘But this has more in common with Arthur Daley, in that it attempts to make as much money from punters as possible by offering services they don’t really need. ‘In three years or so I expect to see more paid-for accounts than free ones. The idea of banking as a utility is disappearing fast.’

A spokesman for Consumer Focus agreed, describing paid-for accounts as the banking sector’s ‘fastest-growing’ service. Sir Richard’s purchase of Northern Rock was formally completed yesterday. - Daily Mail 02/01/12

Clydesdale slips below Santander to bottom of the bank happiness league as First Direct dominates - First Direct, Co-op and Nationwide are Britain 's three favourite banks, according to a major new poll, but Clydesdale Bank has slipped below pantomime villain Santander at foot of the rankings. HSBC-owned First Direct, which consistently tops customer satisfaction surveys, can now decorate its mantelpiece with another gong from research specialists JD Power, complementing the 'best bank' prize it garnered from Which? magazine in October. The top three is completed by ethical bank The Co-operative and building society Nationwide and mirrors the results in JD Powers' 2010 survey.

This time around, First Direct scored 77%, the Co-op 73% and Nationwide 72% for satisfaction among the 3,899 person-strong survey.

But it's painful news for Clydesdale Bank at the other end of the league table. The Scottish-based bank, owned by National Australia Bank, was third-bottom in 2010 but has crashed below Santander to foot the table this time around.

Rising off the bottom of an important league table is the first sign – albeit merely a token at this stage – of green shoots of recovery for giant Spanish bank Santander. Chief executive Ana Botin, who replaced Lloyds-bound Antonio Hora-Osorio in April, has repeatedly insisted Santander is on the path to putting things right. She has admitted the bank tried to squeeze too much profit from customers at the expense of service last year, and has sought to rectify it. Santander has brought its call centres back to the UK from India and has upped staff numbers and improved training. - Daily Mail

David Cameron blasted over knighthood for man who made millions from Northern Rock collapse - David Cameron was under increasing pressure yesterday after a Tory donor – whose firm made at least £100million betting against Britain’s stricken banks – was knighted. Paul Ruddock’s gong in the New Year Honours List was condemned by politicians and campaigners. His hedge fund company Lansdowne Partners made around £100million by betting that Northern Rock’s share price would fall in 2007 and made millions more from moving shares in other troubled banks. Ruddock, 52, who has donated more than £500,000 to the Tories since 2003, was knighted for services to the arts.

But furious campaigners and politicians yesterday said the knighthood sent out the wrong signal and showed Cameron was out of touch with the public. Eddy Weatherill, of the Independent Banking Advisory Service, said: “This confirms that ‘greed is good’ and that no matter how you make your money, provided you make plenty of it, you are going to be rewarded. The majority of people will see this as the rich aiding the rich and being rewarded for something that is regarded as underhand or a bit shady. I imagine Northern Rock shareholders will be pretty pig-sick at this.”

Gordon Banks, Labour MP for Ochil and South Perthshire and former shadow minister for business, banking and regulation, said: “David Cameron’s judgment on this is well wide of the mark and will leave a sour taste with many. “Before the election, David Cameron pledged to clean up politics, yet now he is giving a knighthood to Paul Ruddock, a man who made millions from the collapse of Northern Rock and has donated over half a million pounds to the Tories.

“It speaks volumes about the Tories’ priorities. At a time when hard-working Scots are struggling to get by, it’s the Tories’ friends in the City that are being rewarded. “David Cameron has shown he is completely out of touch with decent British people.”

Labour MP and Treasury select committee member John Mann described Ruddock’s knighthood as a “disgrace” and said the country was “sick to death” of bankers getting knighthoods.

Downing Street has tried to play down the row, with a Government source highlighting Labour’s decision to award disgraced former Royal Bank of Scotland boss Fred Goodwin a knighthood. Last night, Downing Street insisted that the Prime Minister had nothing to do with the decision to give Ruddock a New Year gong. A spokeswoman said: “The chairs of the eight honours committees take their recommendations to the main honours committee and agree the final list for submission, through the Prime Minister, to the Queen. “The recommendations that came forward from the independent committees were submitted, unaltered, to the Queen by the Prime Minister.” - 01.01.12 Daily Record

Banking News 2011

Independent Banking Advisory Service (IBAS) is a national, independent, non-profit, unique specialist banking customer membership organization which resolves banking complaints and disputes and which has campaigned on UK Banking customer issues since 1992. We provide bank and business banking assessment, analysis, bank comment and content for BBC TV News, ITV, Radio and national newspapers.