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.
Many people are suffering from large credit card debt and the number of household with credit card debt of over £1000 is growing at an alarming rate. The problem with credit card debt is that interest can accumulate very quickly and this can result in larger monthly bills, which can lead to late payment. This in turn can result in even higher interest rate. This spiral can quickly get out of control.
The key to reducing credit card debt is by breaking the spiral and taking control of your finances. Below are three easy ways to do just that.
Ask Your Bank to Lower Your Credit Card Interest Rate
You can ask your bank to lower your rate. The best way is to make your request reasonable. For example, you call your bank and tell them that you have been offered a lower rate by another card provider, and ask them to match that rate. If they refuse, all you have lost is a phone call but there is a very good chance they will lower your rate.
Never pay a credit card late fee
Make sure you always pay at least your minimum payment on time so you will avoid paying a credit card late fee. If you are unable to pay your minimum payment on time, it is important to call your bank and inform them of your circumstances, they may grant your more time.
Most banks often raise your interest rate by 50% or even more if you miss the minimum payment deadline. But if you do miss a payment try to get your bank to waive the fee. You may to get an excuse such as you were ill or out of town.
Get a New credit Card
If your bank refuses to lower your rate or waive your late payment fee, simply search for a lower rate card and transfer your balance. There are plenty of banks out there eager to accept balance transfers.
There are a number of ways to reduce your tax bill taking advantage of your allowances and entitlements, which most people are not aware of.
Income Tax
All UK citizens are entitled to a tax free allowance. In 2008/2009 this allowance amounts to £5,435. This is the sum that you can earn before any tax is due to the Inland Revenue. Many people, who are married, fail to make use of their personal allowances and needlessly pay too much tax. Take the following example: Wendy and Fred are married. Fred goes to work everyday as a policeman and earns £23,000 a year. Wendy and Fred have a joint savings account which earns £1000 of interest each year. As a result of the account being in both their names, tax is due on Fred’s £500 share. If the account was opened on Wendy name, all the interest that was earned would have been tax free as she does not work saving over £100 in tax.
Capital Gains Tax
Like Income tax, individuals also have a capital gains tax allowance each year, which currently stands at £9,600. The government allows that shares or property that have increased in value and have resulted in a capital gain can be transferred between partners, allowing both allowances to be used to total £19200. Another important factor that should be considered with recent stock market falls is that capital losses can be carried forward and offset against future gains. The key is to prepare and think ahead.
Inheritance Tax
Levied on the estate of a deceased person inheritance tax is often the most hated, but with enough preparation most people will never need to pay it. The transfer of assets between husband and wife is exempt from Inheritance tax purposes and as a result allowances of £325000 per person are often wasted. Couples often prepare for this by writing in their will that on the death of the first person, £325000 of their assets are based on to their children, allowing for a total inheritance exemption of £650000. Another alternative is to gift items to your children while you are still alive. Assuming you survive for 7 years, these gifts will not require inheritance tax to be paid.
Home Businesses
If you have started a business from home you might be missing out on a number of tax expense entitlements. If you run your business from a section of your house you are able to recoup a share of the cost of expenses that you might pay such as electricity, phone calls and rent against any income that the business generates. The easiest way to claim any of these expenses is via your self assessment tax return which can be requested from your local tax office. The proportion on which you can claim is worked out based on the total number of rooms used for your business divided by the total number of rooms in the house.
Bank of England policymakers have decided for the second month running to leave British interest rates at 5% in august. The Bank of England‘s 9 member monetary policy committee voted 7-2 to maintain the level of borrowing costs on August 7.
Policymaker Tim Besley urged the Bank of England to lift borrowing costs to 5.25 percent while David blanchflower voted for a quarter-point cut.
The three-way split was identical to last month monetary policy committee’s voting pattern, when it was also decided by a majority vote to leave rates at 5.00 percent amid slowing economic growth and soaring inflation.
“The tone of the (August) discussion confirms that the interest rate debate remains finely balanced for now,” said Capital Economics analyst Jonathan Loynes.
“Accordingly, there is little here to suggest that other members are about to join Blanchflower in voting for a cut in the very near future. Nonetheless, with inflation close to a peak and the economy heading towards recession, we still think rates could be falling by year-end and will eventually drop much further than the markets expect,” Loynes added.
British annual inflation grew at the fastest pace for 16 years in July, to a level of 4.4 percent, as food prices surged, official data revealed on August 12, following the central bank’s latest decision on rates.
The Bank of England last week warned that British inflation was set to rise sharply to around 5.0 percent this year, before declining rapidly toward the government’s target of 2.0 percent from early 2009.
As the UK and United states continues to show signs of economic downturn and cost of food, fuel and interest rate continues to rise, knowing how to reduce your expenses and changing your spending habits can make your money go further during economic recessions and economic downturn.
Switch your mortgage: If you have a mortgage and your interest payment is too high. Why not switch your mortgage to a better deal. You will surprise at the savings you could make. To find out the best deals on offer use a fees free broker to check.
Use energy saving appliances: Your annual fuel bill will fall, when you use the most efficient home appliances. New electrical appliances have the energy saving logo, so choosing the most efficient one. Using energy saving light bulbs can last longer and reduce your electricity bills.
Cut down on driving - Running a car can be very costly especially as petrol prices, insurance and road taxes continue to rise. The best action is to abandon your car and use public transport. But if having a car is a must, why not consider buying a less powerful, more fuel efficient car. Your running cost will be lower. Slowing down when driving can save you money on car fuel bill. A recent research found that most car engine run most efficient at 50 -70 miles per hour than at 80mph.Save on car insurance but searching for cheaper car insurance online.
Avoid using expensive credit cards – Do not buy anything you can not afford with a credit card. Credit cards are an expensive way of borrowing than your local bank loan which offers better rates and better terms for you. If you are going to use a credit card, use credit card that offers 0% on balance transfers.
Cut down on expensive sandwich and junk foods – sandwiches, Burgers, fizzy drinks, sweets, potato crisps and takeaways are more expensive and do not nourish your body like the less cheaper fruits and vegetables. Instead of buying a expensive sandwich from a shop, taking a pack lunch will save you a lot of money.
Stop smoking and drinking – last April the government increased the taxes on cigarettes and alcohols. You could save thousands a year just by stopping smoking and drinking. The average price for a packet of 20 in the UK is £5. For a 20 a day smoking habit will cost over £1500 a year.
Do your shopping online. – shopping online can save you money. Online retailers are usually cheaper than high street retailers due to lower running cost. Thousands of online retailers offer cash back deals, which will reduce your shopping cost even further.
Open a high interest savings account – You can receive a higher interest rate when you open an online savings account than a regular current account. If you are not getting the best possible interest rate for your current saving account, you can move to a higher interest account.
Draw a budget - To handle your personal finance properly you will need to write a budget and then stick to it. When creating a budget you will need to consider your past spending and personal debt and then allocates your future personal income towards your savings, debt repayment and expenses. There are various tools available to help to create your personal budget such as the Mint.
Cut your mobile and telephone cost – there are numerous choices of telephone and mobile deals and packages to choose from. If you are paying too much for your monthly calls and text, while not consider switching to a cheaper tariff provider.
A futures contract is an obligation to buy or sell an underlying asset at some time in the future, at a pre-determined price. Futures contract are traded on regulated and organized futures exchange and the exchange act as a clearing house to every trade.
The futures contract detail the quality and quantity of the underlying asset. Futures contract is an obligation and in most cases the obligation is fulfilled by simply making an offsetting trade that takes you out of your original open position. Some futures contracts may call for physical delivery of the asset. The risk to a future holder is unlimited, and because pay off pattern is symmetrical, the future seller risk is also unlimited.
Futures contracts are settled daily and the final value price of all position are “marked to the market” each day after the official market close. So an account is either debited or credited by the futures exchange based on the change in the settlement price from day to day. The use of futures exchange gives confidence to both parties (buyer and seller) that their trade will be executed, no need to worry about the credit worthiness of the other party.
In futures trading the word margin refers to the amount of money you need to have in your account for a trade. The margin levels are set by the exchanges based on volatility and can be changed at any time. You are free to have more than that the margin requirement in your account. But once a position is established you are required to keep a “maintenance margin”.
Options are financial contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset (e.g. shares, bonds, commodities, currencies) at a specific price on or before a given date.
There are two basic types of options. A call options gives the option holder the right to buy, while a put option gives the option holder the right to sell. Call options are similar to having a long position on a stock. Buyers of calls hope that the stock will increase substantially before the option expires. Put options are similar to having a short on a stock. Buyers of puts hope that the price of the stock will fall before the option expires.
There are four types of participants in options markets depending on the position they take: Buyers of call options, sellers of call options, buyers of put options and sellers of put options.
Option Terminology - The total cost (the price) of the option contract itself
Strike Price – The price at which the underlying stock can be purchased or sold
At-the-Money –the option’s strike price is the same as the underlying price.
Out-of-the-Money –the option’s strike price is higher (for calls) or lower (for puts) than the underlying price.
In-the-Money – the strike price is lower (for calls) or higher (for puts) than the underlying price.
Why Trade an option – options are used to help protect underlying positions against price fluctuations. This is known as hedging. the main reason for using options to hedge position is that by using options, you would be able to restrict your downside while enjoying the full upside in a cost-effective way.
Trading Opportunities and speculating: wide variety of strategies can be created using options from conservative positions to risky ones.
