Bank loans are continuing to be scrutinised by outsiders as an inquiry is set to consider the delicate question of break-ups.

The lack of bank loans may be one of the catalysts which is causing voices to call for a thorough review of banking and the government inquiry is determined to get to the bottom of the issue. At the heart is the vexed question as to whether banks should be split into two: one side which handles retail business and the other which handles investment business, and never the twain shall meet.

Breaking up is just one of the issues being explored by the Independent Commission on Banking and thoughts are polarised on both sides of the argument. Some say that banks should not be allowed to gamble with the investors money and get into situations which caused the current financial crisis. And that retail money must be protected from investment bankers who instead should gamble with their shareholder funds and not customer cashflow.

Others cry foul, saying that to split banks will in effect ruin capitalist principles in the UK and that many banks would have to up anchor and move to a more favourable regulatory environment. This would decimate an industry in which the UK leads; one of few which brings home the bacon nowadays.

HSBC and Standard Chartered have already fired warning shots across the Government’s bows, saying that if the rules were to be dramatically changed, then they would to move their headquarters overseas.

Sir John Vickers will head up a five strong panel and he was quoted as saying:
“Experience shows that the risks from not asking hard questions about financial stability and competition are far greater than from doing so.”

Sir John is the ex-chairman of the Office of Fair Trading and is joined by another non-banker ex-regulator Clare Spottiswoode who’s the former director-general of Ofgas. Others might raise an eyebrow at the others on the panel, wondering if a few foxes had got into the hen house.

They are Bill Winters, the formerly co-chief executive of investment bank JP Morgan; the chief economics commentator at the Financial Times Martin Wolf; and, Martin Taylor, who is a former chief executive of Barclays.

The first recommendations will be ready about a year from now, in September 2011.

Chief apologist for the banks, Angela Knight, in her role as chief executive of the British Bankers’ Association, trumpeted that the banks had nothing to hide and that they welcomed the commission:
"We believe the UK industry has already taken significant steps to improve its financial position.”

It’s now a matter of wait and see. Bank loans will remain under scrutiny for a good while yet.

Guest Article by Neil Camp 

New research from the Marks & Spencer money shop, known as M&S Money, shows that most of the UK public are very brand loyal.

The money shop cites new research which shows that once shops and businesses have gathered the trust of the shopping public, they tend to stay loyal and return again and again. Some can remain loyal for over 20 years. Whether this be a food brand, a particular shop chain, or a certain doctor or butcher, people keep going back so long as the trust remains.

So why do people stay so long with their favourite professionals or businesses? Most cite customer service as their main criteria for establishing a positive relationship; good customer service apparently keeps people coming back for more. The research done by Marks & Spencer revealed that six out of 10 people claimed customer service as their main reason for staying faithful.

When it comes to doctors, the British are fiercely loyal if they have a good relationship with their GP. The survey indicated that on average the British keep their doctors for 13 years, with a further 10 million returning to visit the same doctor for 25 years. Favourite and trusted hairdressers are coveted by British women, 1.3 million of whom stick with the same hairdresser for over 20 years.

Banks will be pleased to hear that once a customer is loyal, they will be equally as long-staying with the bank of their choice. Men on average stay with their main bank for 14 years, with women staying on for an extra 12 months with an average of 15 years.

"Consumers will evidently stick with businesses and people who deliver great service and look after their customers. Most people can name someone they trust completely, whether cutting their hair, managing their money, decorating their house or fixing their car. People clearly feel strongly about good customer service, reliability and trustworthiness as these are reasons why they stay loyal for so long,” says Colin Kersley, chief executive of Marks & Spencer Money.

So what of the customers of the brand that instigated this research? How faithful are the Marks & Spencer customers?

“After 25 years in business, M&S Money has stood the test of time and we know how important it is to continue earning the loyalty of our customers. While the average relationship lasts nearly nine years, our own M&S Money customers have remained loyal to us for an average of 17 years.”

This established money shop is one of the many businesses and professionals, once they have proved their worth to their customer, will enjoy loyalty for many years to come.

Guest Article by Neil Camp 

Those with bank accounts and loans are over-estimating their balance by £70.73 concludes research from a top UK bank.

Barclays discovered that when customers with accounts and loans thought about what their balance was, most could not accurately say how much money was there at any one time and, on average, over-estimated the figure by £70.73. This was the average amounts for Brits in general, but the research goes even deeper, suggesting that Londoners are even worse. Those living in London overestimate their balance by about £91.62. The research compiled a list of areas of the country where the most out of touch with their bank account live. The top ten included Leicester, Manchester, Edinburgh, Newcastle and Portsmouth.

So why this lack of knowledge when it comes to our bank balance? Barclays’ research indicated that customers only check their bank balance four times a month. To solve this, Barclays’ research suggests that mobile and text banking may be the answer. 57% of people questioned believed that using mobile and text banking would be a way of keeping more on top of their balance.

This is backed up by more of the survey’s findings: 84% who currently used mobile banking were more accurate in estimating their bank balance. Compared with the 83% of bankers with no mobile banking capabilities, only 17% of those with mobile banking admitted they didn’t know what was going in and out of their bank account on a regular basis.

“Being in control of your money starts with knowing how much you’ve got and where it is being spent. Online and telephone banking made that easier and now mobile phone banking is taking it a step further. Mobile phone banking is still a relatively new way of doing your banking but the number of users is growing at a phenomenal rate and simultaneously more features and functionality are being added. It’s really encouraging to see the positive impact it is having on helping people stay in control of their finances in a quick, easy and convenient way,” said Sean Gilchrist, Barclays Digital Banking Director.

Keeping on top of bank accounts and loans is important to ensure you are not overspending and to get a good idea of things such as day-to-day budgets. The Barclays research suggests that things such as mobile banking can be a great help in keeping on top of your finances.

Guest Article by Neil Camp 

Customers may like to rank their bank, but the European regulators and central banking governors have just done the same thing.

But how they rank their bank is far more exacting, as senior European regulators have got together in Basle, Switzerland, and created new stringent capital rules.

It comes down to how much capital a bank should hold in case it hits a financial problem. The financial crisis in 2008 highlighted how the banking system – not just in the UK, but across the globe – could not cope with a crisis, such as the US mortgage collapse.

It has been agreed that banks should now put aside some 7% of their loans and investments in reserve to cope with financial wobbles, without having to run to their respective governments for taxpayers help. The figure used to be 2%, which proved completely inadequate as the banks stood on the verge of near collapse.

But for some commentators, the newly found prudence could ironically lengthen recession, and might actually cause the double dip most economists fear. The argument goes that if banks have to spend more of their cash in bolstering their reserves, then that means less cash for the consumer on the street, or for hard-strapped businesses.

The UK’s chief money regulator was pleased though, with the Chairman of the Financial Services Authority Lord Turner saying that the changes were: “…a major tightening of global capital standards and will play a major role in creating a more resilient global banking system…”

Jean-Claude Trichet, President of the European Central Bank, added his weight to the proceedings, declaring that the new rules were: “…a fundamental strengthening of global capital standards. The transition arrangements will enable banks to meet the new standards while supporting the economic recovery.”

The US added their congratulation as well; it’s been known for a long time that Barak Obama, the American President, is in favour of more stringent banking rules worldwide.

For those worried that the new rules could bring about a double-dip recession, their fears should be somewhat calmed with the news that the Basle III – as the new guidelines were called – do not come into force until 2013 and will still then take several years to be gradually be introduced. Banks will not have to immediately squirrel away millions of pounds into their vaults.

And Basle III still needs the final ratification from the heads of governments who attend the G20 summit in November.

The reactions from the individual banks has been mixed. Many UK banks already discipline themselves to reserves pegged at around 9%, which possibly highlights the inadequacy of the new rules. But mainland European banks are going to find it more difficult, as they have operated traditional with lot lower reserves.

Indeed, the Swiss, UK and US authorities were lobbying hard for 10% and feel that 7% is just not onerous enough and will not deflect the next major stress test.

So from now, you can rate your bank from a new perspective.

Guest Article by Neil Camp

Goldman Sachs has had a $550 million fine imposed on it to settle civil fraud charges after it was accused of misleading investors on major mortgage deals.

The huge investment bank raised concerns over the way it marketed the mortgage deals to investors at a time when the US housing market was about to enter stormy waters.

Levying the fine, said to be the biggest smack on the wrist for a bank in history, was the Securities and Exchange Commission which acts as the US finance watchdog.  The case centred on allegations that Goldman Sachs did not reveal key information when one of its clients, a firm named Paulson & Co and a major hedge fund, was party to choosing which securities were placed within a mortgage portfolio called Abacus, which was then marketed and sold to investors throughout 2007. The key information was that Paulson & Co had at the same time ‘bet’ that the value of the mortgage securities would fall.

And the securities did fall, losing the Abacus mortgage fund some $1 billion in the US housing market collapse. The $1 billion was paid to Paulson & Co, which had effectively stood on both sides of the deal as a ‘short’ investor; a fact not relayed to the investors in Abacus.

Some of the big losers in the deal will get some compensation. The Royal Bank of Scotland, which took a $840 million hit, will receive $100 million, still a huge loss, and the German bank IKB Deutsche Industriebank will get back $150 million, recouping nearly all their losses.

The US Treasury gets around $300 million of the fine proceeds when the deal is finally approved by a federal judge.

But although Goldman Sachs received the record fine, industry experts say that the investment bank got off lightly. Such is the level of the bank’s profits, that the fine would be effectively recouped in a matter of weeks. Also the Goldman Sachs share price rose nearly 5% on the news, meaning that they got a nearly one billion dollar boost to their market capitalisation.

This is unlikely to be the last chapter in the Goldman Sachs mortgage deals saga.

Guest Article by Neil Camp

In today’s sophisticated financial sector, switching current bank accounts to save money is about as savvy as you can get.

As with all financial products, people should not thank that they owe their bank loyalty, or indeed, stay with a bank just because they have done so for years.

Banks are smart operators when it comes to what they will offer their customers and they realise, as everyone should, it’s a highly competitive market and in today’s comparison world, the consumer has the edge.

Without a good bank account comparison website, it would take a log time trawling through all the bank accounts of offer to find the right one for you.

Now one caveat on all that. People do build good relationships with their banks and there is something to be said for staying loyal if that translates to a good account and other financial product deals, such as loans and mortgages. That said, even those with good bank relationships, can always look to opening another account if that suits them at the time. Nothing is fixed in stone in today’s modern personal finance sector.

Current accounts come in various types which tend to include high interest current accounts, business current accounts and current bank accounts.

A good current bank account comparison tool should be able to calculate what you might gain per year from a different account.

They should also divide the accounts into key categories, making comparison easier. You could then start off by comparing all current bank accounts, then easy access accounts, straightforward current accounts, fixed rate accounts and ISAs.

This allows the user to then take each category in turn and see which account offers then the best deal.

Take the category current accounts. The information laid out before you should include the financial institution offering the account (Alliance & Leicester, NatWest for example), the account name (something like Premier Current for example) and any incentives to attract you as a customer, or keep you as a customer; how much interest is paid, if any, and when; and, details about any overdrafts that might be available and what interest rate is charged.

So there you are. Choose a good current bank account comparison website and it’s all mapped out in front of you.

Guest Article by Neil Camp