By Hermes Solomon
HOW WILL our major banks survive and return to profitability when NPLs hugely outweigh ‘real’ capital assets and any economic upturn seems unlikely.
Our president and finance minister are talking the economy up at every opportunity (conferences, media ‘splash’, hustings and even at liturgies from the pulpit) without proffering substantial evidence of an upturn now or in the immediate future.
Is returning to world bond markets more significant than creating jobs?
Does our minister of labour seek to establish a minimum income in anticipation of prolonged high unemployment or is she provisionally peddling brioche to the poor in the certainty her ‘botched’ bill will not receive legislative approval?
UK government controlled banks have progressed little since the banking collapse, the government only recently relinquishing part of its 75 per cent holding in LloydsTSB – TSB set afloat on the UK stock market, its share soaring by 12 per cent in the first day’s trading.
HBOS (Halifax Bank of Scotland), taken under government control in 2009 was, from 2004 to 2009, the second largest shareholder in the Bank of China, itself the world’s fifth largest bank by market capitalisation in 2008.
Before the 2008 banking collapse, RBS Group was very briefly the largest bank in the world and for some time the second largest bank in the UK and Europe (fifth in stock market value), and the fifth largest in the world by market capitalisation.
Subsequently, with a slumping share price and major loss of confidence, the bank fell sharply in the rankings.
The Bank of Cyprus’ downfall in a tiny way has emulated RBS; it was and still is the largest bank in Cyprus, and although it grew wings throughout Greece, Russia and the Balkans prior to its crash, it is now hopelessly overstretched and unlikely to regain anywhere near its former stature.
Like its ‘partner in crime’ the co-op, the Bank of Cyprus faces as difficult a future as HBOS, which has been struggling unprofitably for the past six years even though the UK economy is reportedly booming due to foreign investment and soaring house prices in the south east.
So why should we expect any of our major banks to return to profit or the economy to growth in the foreseeable future when we are years into high unemployment and house prices continue to slide?
Unless interest rates to borrowers are drastically reduced and capital injected by recovering NPLs, our banks will remain in the doldrums, ‘real’ unemployment continue to rise and this economy splutter helplessly no matter what politicians say.
This past twenty years our banks have been grossly inefficient, overstaffed and criminally ‘boarded’.
But when it comes to criminality, it’s been the same worldwide, so our banks can’t be blamed for joining the queue of money launderers, sleight of hand loan contractors, dishonest foreign exchange dealers, worthless bond issuers and outrageous embezzlers of depositors’ savings.
But our banks can be blamed for being ‘caught’! They joined the ‘champion’s league’ of bankers in the year 2004 and by 2013 the ‘champion’s league’ had crushed them.
There’s no pretending that most world banks are any more solvent than our banks, but they have free access to funds and government support whereas our government is stony broke – the European Central Bank and IMF now calling the shots.
HBOS and Lloyds, among others from ‘the champion’s league’, have been fined heavily by regulators for rigging Libor and selling worthless bonds.
Banks worldwide have lost public confidence and depositors have grown increasingly wary. Moving assets to stock markets or commodities will give savers temporary respite, but a ‘greater financial crisis’ is definitely on the cards.
Last week I dealt with Lloyds Telephone Banking 24/7 service and was offered 1.1846 euros for one pound sterling when the currency market commercial rate was sitting at 1.25 euros. I refused the offer and went immediately to my Lloyds online account, where I was offered 1.2035 – a disparity of two cents.
I called Lloyds Telephone Banking to inform them of the ‘criminal’ disparity of rates within the same bank and for the same transaction, whereby they offered to pay me 33 pounds for discovering ‘their error’ and a further 15 pounds for the inconvenience.
Bank commissions have crept up – in the ‘old days’, one or one and half per cent commission was normal, but now they take anything up to five per cent. And on top of that Lloyds charges 20 pounds for a telephoned currency transfer and only ten for the same online.
The telephone dealer’s name was given as Sungi. She spoke with a pronounced Indian accent and I wondered whether I was dealing with a Lloyds Forex set-up in India and not the UK at all.
Some other examples of chicanery for you: Bank of Cyprus bank account statements, which are posted three weeks out of date, are charged at two euros fifty a statement – creeping charges!
A sterling account holder at BoC sought to withdraw funds in sterling. She was told by her local branch manager that she must first convert the sterling into euros then purchase sterling – double ‘inflated’ commissions for the bank.
A bank ‘on the other side’ charges 44 euros annually for a euro account credit/debit card and when employed on ‘this side’ double commission is charged for conversion – euro account to Turkish lira then Turkish lira back to euro – gobbledygook.
Banking practices worldwide have become ‘sleight of hand’ orientated so let’s stop pretending that our banks alone get up to mischief.
You must now study your bank statements, the bank’s terms and conditions and remain alert at every turn. And with low depositor interest rates here taxed at 30 per cent I recommend you close all unnecessary accounts.
I had five with the Bank of Cyprus and now only two of which I no longer receive statements.
Stay awake or you will be robbed by today’s Dick Turpins!