According to a recent article in the Iceland Review, says Icelandic Banks in the UK are benefiting from recent banking crisis in the UK and US. Icesave and Kaupthing Edge have seen surge in business after UK customers lost faith in their own banks.
Kaupthing said that Monday was in fact the fourth best day of business since it launched its Edge savings account in February this year.
If this article is true, you will expect in the months more UK and US banks facing credit crisis and since depositors are taking out their money, the Central Bank will have to bail them out.
The FSA is an independent body regulating the UK financial services industry. The FSA has three main aims:
The first is maintaining confidence in the UK financial system by supervising exchanges, settlement houses and other market infrastructure providers; conducting market surveillance; and transaction monitoring.
The second is promoting public understanding of the financial system to help people gain the knowledge, aptitude and skills they need to become informed consumers, so they can manage their financial affairs more effectively.
The third is securing the right degree of protection for consumers. Vetting entry aims to allow only those firms and individuals satisfying the necessary criteria (including honesty, competence and financial soundness) to engage in regulated activity. Once authorized, they expect firms and individuals to maintain particular standard and monitor how firms and individuals meet them. Where serious problems arise they investigate and, if appropriate, discipline or prosecute those responsible for conducting financial business outside the rules. They also use their powers to restore funds to consumers.
Their work focuses on three main types of financial crime:
• Money laundering
• Fraud and dishonesty
• Criminal market misconduct such as insider dealing.
They also consider
• The need to use resources in the most economic and efficient way
• The responsibilities of the management in regulated firms
• The need to balance the burdens and restrictions on firms with the benefits of regulation for consumers and the industry
• The need to allow innovation
• The international character of financial services and markets and the UK’s competitive position
• The value of competition between financial firms
Banking giant Barclays bank has agreed to buy some of the core assets of stricken US investment bank Lehman Brothers for 1.75 billion dollars. $1.5 billion for its New York headquarters and two data centers and $250 million for the trading unit following negotiations in New York, the bank said on Wednesday, Sept. 17. The deal still requires backing from a bankruptcy court.
Lehman Brothers’ US parent filed for bankruptcy protection a couple of days ago, with the UK main trading operation also going into administration.
The US arrangement allowed the group to pursue to sale of its broker-dealer operations, as well as its investment management division. Another subsidiary, Lehman Brothers Asset Management, was also not subject to the bankruptcy petition.
It was a similar story in the UK, where a number of business areas were not part of the administration process, including Lehman Brothers’ asset management and corporate finance business.
It is understood that Barclays has steered clear of becoming involved with so-called “toxic investments” made by Lehman Brothers in volatile residential and commercial property markets.
Approximately 10,000 Lehman employees work for the fixed income and equity sales, trading and research and investment banking businesses that Barclays is set to acquire, Barclays said.
But there has been criticism in London that none of the 5,000 Lehman Brothers’ employees in Britain will benefit from the Barclays move.
This is basically the ruling in LIPKIN GORMAN v KARONALE (1989). Bank should not pay any cheques not authorised by the customer (i.e. that the bank has no mandate to pay); and this basically means those with forged or unauthorized signatures.
If the bank pays such cheques it must make good the loss to the customer.
Problems:
Well, there are the one you would expect! How on earth do you know when it’s forged; good ones by definition will not be noticeable?
Further, what if someone has got the authority to draw cheques, but is simply misappropriating funds? This will be even harder to detect.
To complicate things even more, the bank has a duty of confidentiality. The existence of this may prevent them from disclosing facts they know.
The judge in LIPKIN GORMAN had the happy task of sorting this out. (The rulings he established are all quite straightforward if you remember that it’s just a case of when a bank can wrongly pay a cheque and get away with it).
The basic premis are that the bank will be protected if they didn’t know it was a cheque they shouldn’t have paid.
What the judge was giving were the criteria for when they couldn’t reasonably be expected to know that they should not have paid, and will thus be entitled to debit the customers account.
The criteria he established were as follows:
1. When the circumstances are such that a reasonable banker would hesitate to pay the cheque at once.
2. If they did have grounds for hesitating, then to continue and pay would amount to negligence by the bank and render the bank liable.
The question to ask is; whether a reasonable and honest banker, knowing the relevant facts, would have considered that there was a serious or real possibility that the funds were being (misused).
Here the judge held that the bank had no such knowledge and were therefore entitled to debit the customers account. Surprise, surprise the bank won!
The bank’s duty of confidentiality comes from the JOACHIMSON V SWISS BANKING CORP case. The bank’s duty of secrecy is not an absolute duty and there are exceptions to this duty. Most of these exceptions come from the case of TOURNIER v NATIONAL PROVINCIAL AND UNION BANK OF ENGLAND (1924), but there are also other important exceptions from various statutes.
TOURNIER v NATIONAL PROVINCIAL AND UNION BANK OF ENGLAND (1924).
This famous case listed four exceptions where disclosure can be made without the customers express authority
(1)Under a legal duty i.e. compulsion of Law e.g. subpoena
(2)It’s in the Bank’s Interest e.g. suing for a disclosed amount
(3)It’s in the Public Interest e.g customer trading with an enemy
(4)With the customer’s Express OR Implied consent e.g. bank statements to their accountant
Compulsion of Law
Many statutes allow bank to disclose information of transactions on a customer’s account to the court or the good old honest British bobby. There are loads allowing this and more are being enacted after Sep 11th and the incidents of drugs/money laundering
BANKERS BOOKS EVIDENCE ACT 1879
POLICE AND CRIMINAL EVIDENCE ACT 1984
DRUG TRAFFICKING OFFENCES ACT 1986
PREVENTION OF TERRORISM (TEMPORARY PROVISJONS) ACT 1986
Public Duty to Disclose
This is really wide and been criticised. The usual sort of things is operating account of an ‘enemy’ i.e. group of people the government has decided to declare war on. It was used in the LIBYAN case.
Over the past ten years there has been an increased in the number of credit cards available. So much so that only a few people actually know the different between the three latest types of credit cards. Below is a guide to the latest type of credit cards and the advantages / disadvantages of having them.
Cash Back Credit Cards
Cash back is a loyalty scheme that rewards customers when they use their credit card to make purchases. You will receive a cash back percentage of your purchase amount each time you use your card which is usually totaled up and paid to you as an annual lump sum.Generally, these credit cards offer cash back between 3 to 6% on purchases. However common purchases, such as gas, groceries, and prescriptions, will usually only get you 1 to 3% back.
The advantage of using a cash back credit card is that everything you buy is a little cheaper as cash back is effectively a discount on all spending. To benefit from cash back credit cards you will need to pay off your card balance in full and on time each month or you’ll risk paying interest and the charges. The interest and charges you will pay will outweigh the loyalty rewards or cash back gain. It is important to set up your payment by credit cards to ensure payments are made in full and on time.
Balance Transfer Credit Cards
These type credit cards allow you to put your existing balances on other credit cards on this new card, and often be able to get a 0% interest rate for a short time usually 5 months, 6 months or 9 months. This means some real savings, if you do not fill up your other credit cards again. Of course you must always meet at least the minimum monthly repayments with your new card as the intro deals do not mean you have nothing to repay; they simply mean you will not be charged interest on what you owe. Watch out for fees, though, some cards will not charge you at all for transfers. These charges are becoming more and more common as card providers try to recover some of the money they lose by offering interest free periods. The charge is typically 2.5% of the balance transferred.
Air Miles Credit Cards
These credit cards give you air miles for your purchases and they can be used to get discounts toward flights, or even free flights. Air miles work like a point scheme, where you rack up mileage that you can then exchange for flights to different destinations. Usually these points can also be used toward purchases in certain stores to give you some good discounts. Be careful to read the fine print as some Are Miles credit cards has hidden charges. There are often hidden costs when claiming “free” flights. This occurs when the flight itself is free, but any applicable taxes, fees and surcharges are on top.
