The cost of non-compliance
- in 2011, HSBC was fined £10.5m by the UK regulators for mis-selling investment bonds to 2,485 customers to the banks subsidiary NHFA, investment was supposed to help people finance long term care but 87% of the sales were unsuitable: bonds sold represented a five year investment and were being sold to people with an average age of 83, many people didn’t have a life expectancy of five years and were living or about to in a care home, NHFA closed and HSBC was ordered to pay £29.3bn in compensation
- in 2012, HSBC was fined $1.9bn by US authorities when it was found to have allowed money laundering via its Mexican subsidiary, its money laundering controls weren’t tight enough and money from the illegal drugs trade had been transferred to HSBC accounts in the US, bank apologised admitted that its money laundering controls were ‘too lax’
The eurozone crisis
- was the result of the impact of the financial crisis on a number of member countries including: Greece Spain Portugal and Ireland
- despite being out of the eurozone, UK felt it’s impact as it lent a significant amount to the Irish government on the basis that subsidiaries of the two uk banks it had a shareholding (RBS and Lloyds) had made large loans to Irish property developers
Help to Buy
◆ Under the Help to Buy: mortgage guarantee scheme (which ended in December 2016), as long as a provider is willing to lend 95 per cent of the purchase price of the property (the borrower having made a 5 per cent deposit), the government will guarantee the loan up to 15 per cent of the purchase price.
◆ With a Help to Buy: equity loan, the borrower makes a deposit of 5 per cent of the purchase price and the government lends 20 per cent; the provider has to lend only 75 per cent.
◆ Help to Buy ISA: until November 2019, if you were saving to buy a house for the first time and saved into a Help to Buy ISA, the government topped up your savings by 25 per cent up to a maximum of a £3,000 bonus.
◆ Shared ownership: some developers and councils offer a chance to buy a share of your home (from 25 per cent to 75 per cent) and you pay rent on the rest. This mainly applies to new builds via housing associations.
The Banking Act 2009
- provides a set of tools that allow the regulatory authorities to resolve a distressed bank or building society instead an orderly way to reduce the impact of a bank failure on financial stability and bank customers
- increased the responsibilities, power and role of the Bank of England by creating a permanent Special Regulation Regime (SRR) for dealing with distressed banks and building societies
- the act has been partly amended by the Financial Services Act 2012
- in 2009, the Bank of England used the powers given to it under the 2009 Act when it transferred the social housing lending business from the failed Dunfermline Building Society to the Nationwide Building Society which was selected as the preferred bidder
The Financial Services Act 2010
- includes provisions that require a bank to have a recovery and resolution plan in case it gets into trouble
- pot lines some consumer protection measures and defines the liability of the Financial Services Compensation Scheme (FSCS) in the event IG bank failure
The Financial Services (Banking Reform) Act 2013
- provides for the ring-fencing of retail banking activities
- this means that the retail banking arm of a bank (side that accepts deposits from customers) will be separated from the investment side of the bank
- if the bank makes losses, it will not be able to take money from a ringfenced area to subsidise its loss-making arm
- introduced preference for deposits protected by the FSCS in the event of a banks insilvency
Finance Act 2016
- introduced changes to several taxes including income tax, personal and savings allowances, pension tax rules, rates of corporation tax, capital gains tax and inheritance tax
- change to the serious ill health pension lump sum means that a person who discovers they have a terminal illness can withdraw their lump sum pension more flexibly
- there were changes in how benefits are accounted for, reform of the ‘wear and tear’ allowance and the introduction of the apprenticeship levy (funding apprenticeships by taxing employers a certain amount out of their pay bill
