Categorised | General, Labour |

UK banks bite the hands that feed them!

In my post last month, I suggested, that what this economy needed was a shot in the arm, a package of measures designed not to avoid a recession, because that is impossible, but to reduce the impact on the people of this country. Unlike either of the main two political parties, I suggested a six point plan, which included a dramatic reduction in interest rates and a requirement that the high street lenders pass on the cuts in full.

Of course I am not suggesting that anyone takes any notice of my posts, but I am pleased that one of those points has been implemented, albeit, not as far as I would have wished. The Bank of England has reduced the rates by 1.5% to 3%. I was calling for a cut to 2%. However, if the country was to receive any benefit, the cuts would have to be passed onto borrowers, both domestic and business. This, for the most part is not happening, at least not so far.

Only Lloyds TSB, through their mortgage arm, Cheltenham & Gloucester and the Bank of Ireland have indicated that they will pass the cuts on in full. Now in the case of Lloyds TSB, I suspect their motive was to demonstrate in a tangible way, that whilst their takeover of HBOS will lead to them becoming the largest retail bank in the UK, they have no intention of using their dominance in a negative manner that would reduce competition. We will have to wait and see whether or not that remains the case of course.

However, when it comes to the other banks, their response demonstrates that they have little or no regard to their customers or the people that have bailed their businesses in one form or other. They have only indicated that they have the interest rate decision “under review”. Well that is just not good enough. When the banks struggled, they came, cap in hand to the Bank of England and therefore the taxpayer, to help them with guarantees, cash injections and short-term cash advances. The banks received pretty much whatever they needed, regardless of the impact to the balance sheet of UK Plc or the cost (and risk) to the taxpayer.

Now the banks have a real chance to demonstrate that they appreciate the assistance or lifeline they have been given. Instead, they are, at least for the time being, indicating that they feel little or no obligation towards the wider UK economy, the well-being of its citizens or their customers. Now, yes I know, before people tell me the obvious, they are ‘independent’ financial institutions and must be free to make commercial decisions. However, as soon as they came to the taxpayer to assist them at their time of need, they gained at the very least, a moral obligation to repay us by supporting anything that would assist the taxpayer in their time of need. Which clearly a reduction in interest rates would do.

I am angry with the bankers, very angry and everyone else should be as well. The banks have made £billions over the past 10 years from their customers. Many, have at times, been reckless in their lending practices, and they hold a considerable proportion of the responsibility for where we are today. So do the borrowers, but banks were and should have been the ‘grey’ men, those that provided a balanced view and set lending criteria. The banks are also being very short-sighted.

The higher the interest rates, the more likely that their will be defaults and house repossessions. In the case of the latter, banks often have to sell properties at auction, resulting in returns of at 20-25% below market values to secure a sale. Add this to the fact that many properties have fallen in value and their losses on each property have to be quite staggering. Therefore, wherever practicable, surely they would be better off attempting to ease the burden and keep more people in their homes?

In additon, the higher the interest rates, the less money that is in the economy and the less transactions that will take place. The latter is the bread and butter of the banks, they make money when people and business transact, they benefit from money that is lost in the system for days on end. They do best when their customers feel able to spend. Customers will clearly be more conservative, they will borrow less and many will reduce their debts. But more money in our pockets, means a more responsible nation, because most people will choose to be responsible rather than reckless. In the past, going bankrupt was a painful and drawn out affair, today it is far easier, no-one benefits, least of all the creditors, if people throw the towel in because they can see no way out. The banks will be first in line to suffer if bankruptcies rapidly.

Whilst I am cognisant of the high inter-bank lending rates, these will come down and in all honesty, the reduction in the Bank of England rates by 1.5% will, for and intents and purposes be neutral to the banks.

Whether we do it now or later, I believe we should all punish the banks that have not supported their customers or the economy by passing on the interest rate cuts in full. Particularly, but not exclusively, those that have received assistance from the taxpayers. We should look to move our current accounts to banks that have supported their customers…en-masse. We must hurt them as they are determined to hurt us. Banks make big money from current account transaction charges and the ‘balances’ are used by the banks to reduce their borrowing costs. We must cancel our credit cards with the banks that are associated with not passing on the rate cuts and consider moving our mortgages. Now I appreciate that this may be impossible for people to do right now, though I am going to, but we must remember, that in our hour of need, even when it was obvious why the Bank of England reduced interest rates, the banks stuck their middle finger up to us all. We must return the compliment. Even if we have to bide our time and do it when the banks least expect it.

I urge everyone to remember each and everyone of these banks that have screwed us and make them pay, make their shareholders fully aware that there will be a medium and long-term price for their refusal to come to the aid of this country. There will be a price for their decision to ignore their moral responsibilities and helping those that helped them. End of rant!

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3 Comments For This Post

  1. Charlie Says:

    It is just another example of how the banks see themselves as the economy, rather than something that benefits from a good economy. I really was hoping that the whole banking system would collaspe, it has become overgrown and bloated. Rather than just a place for people to keep their hard earned money the banks have crept into everything and despite the economic downturn, still managed to make millions off British customers this year.

    Their greed has brought us to this position, their stupid illegal charges (first credit cards, then overdrafts), then the whining they can’t afford to pay it all back, (we can all kiss goodbye to that now), reckless lending, and assumptions that they could just keep squeezing Britons tighter and tighter.

    All we’ve done is re-enforce that behaviour, they’ve learnt nothing. Had the whole system collapsed something else would have taken it’s place. It always does.

    I have taken all my money out of the banks, there are other options these days such as peer to peer lending, and this has shown me that there is very little benefit to keeping money in a bank, they don’t thank you for it, they simply shaft you at every opportunity.

  2. Frustrated Voter Says:

    Charlie: There are also credit unions that offer a viable and increasingly popular alternative to high street banks. On the same subject, I cannot tell you how angry I was when Channel 4 news reported a banker saying, in relation to the interest rate cuts, that banks “were not charities”. No! Yet they clearly believe that the taxpayers are, we were the first people they came to with their own begging bowls.

  3. ias Says:

    Let’s not forget, the Banks, and their practices were ALLOWED to take advanatge of the FREE market competetiveness by Governments around the world – including the UK government with Gordon Brown as Chancellor. This mess, therefore, was created not just by the banks wreckless behavior – taking advcanatge of the weak & vulnerable, then taking it back with repossessions, but by the toothless FSA and the Government. Remember, politicians are in bed with the Banks, Chief Execs and all. They have been allowed to get away with this for such a long, long time. Let’s get serious, who funds these polictical parties? Right!! If you look very closely at policy created by Government, FSA, Information Commisioner’s Office, Banking Code Standards Board, British Banker’s Association and the dreadful Financial Services Authority, BANKING influence and protectionism exist within these policies. If you are a Company director and a bank fails your company after financing it, you will find that the ‘Banking Code’ has very little in it to help & support you; the ‘information commisioner’s office does not allow you to get information from the bank that show how the bank failed you; the FOS is funded by the banks too and their procedures (including Data Protcetion) regarding commercially related Company issues is appalling. Let’s face it, wWHO IS REALLY LOOKING OUT FOR US – THE PEOPLE? MOST CERTAINLY NOT OUR DEAR POLITICAL REPRESENATTIVES.

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