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Yet more banking scandals

...on serious topics that don't fit anywhere else at present.
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Alan H
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Yet more banking scandals

#1 Postby Alan H » August 25th, 2013, 10:17 pm

And so it continues...
Another mis-selling scandal rocks UK banks’ reputation
By Patrick Jenkins

Cleaned-up banking market could come with an unwelcome quid pro quo for customers

Another week, another mis-selling scandal, another example of banks behaving like brutal muggers until they are frogmarched back to confront their victims – and give them a bit of first aid.

This time, 13 banks and credit card companies are going to have to fund a £1.3bn compensation plan for customers who were sold unnecessary credit card theft insurance.

The settlement, imposed by the Financial Conduct Authority, might be less costly than other recent mis-selling scandals – PPI (£15bn and counting); interest rate swaps (up to £2bn). But in terms of blatant mistreatment of customers, it is more egregious than anything that has gone before.

This is an insurance product that duplicated a facility automatically provided by a credit card company: if a thief takes off with your Barclaycard and enjoys a £5,000 spending spree, it is Barclays that will foot the bill, not you – making any kind of personal insurance a nonsense.

There are, all the same, a couple of wrinkles to bear in mind.

First, the mis-selling took place in this case not via the banks themselves but through a specialist warranty company, CPP. The banks were the ones that referred their customers to this go-between and are, quite rightly, being punished for it.

It is surprising, though, that CPP itself has got off so lightly. Yes, it was fined £10.5m last year. But this is a company that, according to regulators, made £845m of revenue and £79m of net profit from the business over the six years in question, 2005-11.

On that basis, it is hard to justify the fact that CPP’s share of the £1.3bn compensation pot is projected to be just £17m, a fraction of the money it made.

It seems the FCA pulled its punches for fear of putting a struggling company out of business. Instead, it should have recouped at least the £79m plus interest, even if that meant wiping out shareholders and debtholders (which, incidentally, include Barclays, Royal Bank of Scotland and Santander).

It should also have added another two banks to the tally of 13 on its hit list – JPMorgan and UBS, the advisers that floated CPP in 2010. The float, at the height of the mis-selling period, valued CPP at nearly £400m, and generated a £120m windfall for the company’s founder and majority owner, compared with less than a 10th of that figure today.

If it has been soft on some parties in the latest scandal, the FCA shows little sign of letting up on the mainstream banks. Lenders are braced for more mis-selling fines and compensation claims in several areas.

They might have breathed a sigh of relief last month when Martin Wheatley, the FCA chief, said there was no evidence of widespread mis-selling of interest-only mortgages, 2.6m of which are outstanding. Some borrowers had claimed they were not aware they needed to repay the loan at the end of the term, in addition to annual interest.

If banks are genuine about having changed their ways and are to have any chance of winning back public trust, they must . . . ensure their sales practices are beyond reproach

But other products – high-cost packaged and premium current accounts, as well as long-term investments, such as endowments and pensions that carry big fees – could yet turn into disasters for the banks.

Something clearly needs to change. A dynamic of perpetual scandal – in which banks milk their customers, are exposed for mis-selling and pay out billions of pounds in compensation – is no way to run a business.

For the new breed of directors running the likes of RBS, Barclays, Lloyds and HSBC, the problems exposed over the past couple of years can be categorised as “sins of the past” – the PPI affair took place largely before 2009; even the latest credit card insurance affair did not extend beyond 2011.

But if banks are genuine about having changed their ways and are to have any chance of winning back public trust, they must get ahead of the game and ensure their sales practices are beyond reproach.

Some insist that process is under way. Lloyds, for example, has returned to the PPI market, with a relaunched “essential earnings cover” product, that it insists is sold only to people who could benefit from it.

A cleaned-up banking market could come with an unwelcome quid pro quo for customers. The aggressive selling of inappropriate products was lucrative business for the banks. Without it, they may charge more for their basic services. But as long as products are transparent and are not mis-sold, consumers should welcome the new approach. It’s surely better than getting beaten up, no matter how good the bandage and aftercare.


Business the first to receive compensation for mis-sold interest rate swaps - a year after payouts were ordered
By HELEN LOVELESS

PUBLISHED: 11:15, 25 August 2013 | UPDATED: 11:16, 25 August 2013

The first compensation payment for a firm mis-sold an interest rate ‘swap’ has been made - more than a year after the regulator ordered the banks to pay out.

Swaps are insurance policies designed to protect against interest rate movements and were widely sold to businesses taking out loans between 2001 and 2008. Regulators last year ruled that the banks had mis-sold about £2billion of swaps, with 40,000 firms affected.

Yet until a few days ago not a single business affected had received actual compensation though some offers of redress had been issued.

The delays in settling with firms have been widely criticised by MPs, campaign groups and those affected. Business Secretary Vince Cable last month urged the Financial Conduct Authority to put pressure on the banks to settle claims more quickly.

Bullybanks, the campaign group made up of more than 1,000 businesses mis-sold swaps, estimate that more than 400,000 jobs have been lost as a result of the mis-selling scandal, with the Treasury losing out on £1.7 billion a year in revenue.

Last month Jeremy Roe, chairman of Bullybanks, said: ‘Instead of coming out with a simple assessment of mis-selling, the vetting procedures are too complex and are causing long delays.’

The main reason for the delay is believed to be the fact that compensation is made up of two parts - the actual amount paid for the swap and the losses incurred as a result of taking out the product, known as consequential losses.

Assessing what a firm paid for a swap is straightforward, but assessing consequential losses is harder. But the banks have been working on the basis that both factors must be assessed as a single claim before any payment can be paid.

However, high street bank Santander has now bucked the trend by repaying one firm the direct costs of a swap mis-sold to them by Alliance & Leicester, which Santander acquired in 2008. The business will now put in a claim for consequential losses separately.

Santander is believed to have acted after former home secretary Jack Straw intervened.

A spokeswoman for Santander said: ‘While we won’t comment on specific cases we can confirm that we have commenced our remediation programme and where appropriate made suitable offers of redress to a number of customers. This is ongoing and we intend to complete this as quickly as possible.’

The mis-selling scandal has even affected high profile business figures. Earlier this month it was reported that Amstrad tycoon Lord Sugar had complained to Lloyds Banking group after hedging products worth £10 million were sold against loans taken out on his property empire.


When will it ever end? Never, of course...
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Alan C.
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Re: Yet more banking scandals

#2 Postby Alan C. » August 25th, 2013, 10:36 pm

This time, 13 banks and credit card companies are going to have to fund a £1.3bn compensation plan for customers who were sold unnecessary credit card theft insurance.
I must admit I've only scanned the above but don't folk have a duty to look out for their own interests? I've never been sold persuaded to buy PPI nor anything like it, what the hell is wrong with folk that they are so easily conned? And why should the shareholders have to compensate them for their gullibility?

Edit.
Maybe a bit harsh, I'll go to bed and read it properly tomorrow. :sleep:
Abstinence Makes the Church Grow Fondlers.

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Alan H
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Re: Yet more banking scandals

#3 Postby Alan H » August 25th, 2013, 10:56 pm

Alan C. wrote:
This time, 13 banks and credit card companies are going to have to fund a £1.3bn compensation plan for customers who were sold unnecessary credit card theft insurance.
I must admit I've only scanned the above but don't folk have a duty to look out for their own interests? I've never been sold persuaded to buy PPI nor anything like it, what the hell is wrong with folk that they are so easily conned? And why should the shareholders have to compensate them for their gullibility?

Edit.
Maybe a bit harsh, I'll go to bed and read it properly tomorrow. :sleep:
Caveat emptor is certainly a thing, but we all need protected to some degree or other from misselling, overselling, upselling, misleading claims, etc. There are many people who are more easily persuaded than perhaps you and I are and there are some very persuasive sales persons out there. It's why we need the ASA, Trading Standards, the plethora of regulatory bodies and ombudsmen and all the rules and regulations and codes of practice. The general public are very rarely an equal player in any transaction - we are an occasional buyer of a diverse range of products and services and rarely know as much as the seller and are therefore in a position where they hold many or most of the cards.

Of course, we could always get rid of all these regulators and red tape and allow corporations free reign...
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Dave B
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Re: Yet more banking scandals

#4 Postby Dave B » August 26th, 2013, 9:31 am

I seem to remember that there were cases where it was suggested, verbally and not recorded, that there might be problems in obtaining loans unless protection was taken up. Before I took out my mortgage I had a friend who found out, when in dire need, just what the protection she was paying for did not cover - her redundancy for a start. So, forewarned, I politely turned down the optional protection on mine.

And still the government spoon feed these people who seem to keep trousering money or hoarding it instead of lending it to re-build industry. Money has become a commodity and an industry almost totally separated from the rest of the world. It is no longer a medium of exchange and trade, of the necessities of life, except amongst us lesser mortals that make up 99.99999% of the world.

Come the revolution . . .
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Tetenterre
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Re: Yet more banking scandals

#5 Postby Tetenterre » August 26th, 2013, 2:18 pm

Alan C. wrote:I must admit I've only scanned the above but don't folk have a duty to look out for their own interests?


I have some sympathy with the dictum of Prof (of Law) Jim Gower: Regulation should not be at a level set to achieve the impossible task of protecting fools from their own folly; its purpose should be to prevent honest persons being made fools of.
Steve

Quantum Theory: The branch of science with which people who know absolutely sod all about quantum theory can explain anything.

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Nick
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Re: Yet more banking scandals

#6 Postby Nick » August 29th, 2013, 1:59 pm

There was a very interesting article in last week's Sunday Times, by Dominic Lawson (sadly behind a paywall, but I've kept the paper article if anyone is interested...) the gist of which was, "so bankers have ripped people off by offering insurance against a non-existent threat (card fraud), but what about the alternative health peddlars? Shouldn't they be hit just as hard?"

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Alan H
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Re: Yet more banking scandals

#7 Postby Alan H » August 29th, 2013, 2:12 pm

Nick wrote:There was a very interesting article in last week's Sunday Times, by Dominic Lawson (sadly behind a paywall, but I've kept the paper article if anyone is interested...) the gist of which was, "so bankers have ripped people off by offering insurance against a non-existent threat (card fraud), but what about the alternative health peddlars? Shouldn't they be hit just as hard?"
We see that same fallacious argument used by those very same pedlars of quackery. The colloquial term for it is 'whatabootery'.
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Dave B
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Re: Yet more banking scandals

#8 Postby Dave B » August 29th, 2013, 5:01 pm

Is that "whatabootery" or "whataboutery"? Should possibly be, "butwhataboutery"?
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015

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Nick
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Re: Yet more banking scandals

#9 Postby Nick » August 29th, 2013, 5:10 pm

Alan H wrote:
Nick wrote:There was a very interesting article in last week's Sunday Times, by Dominic Lawson (sadly behind a paywall, but I've kept the paper article if anyone is interested...) the gist of which was, "so bankers have ripped people off by offering insurance against a non-existent threat (card fraud), but what about the alternative health peddlars? Shouldn't they be hit just as hard?"
We see that same fallacious argument used by those very same pedlars of quackery. The colloquial term for it is 'whatabootery'.

Er.... I'm not sure we are understanding each other. Lawson wasn't defending bankers, but attacking quacks. So I don't think your point (if I've understood it...) is actually valid.

Or have I still misunderstood...

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Alan H
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Re: Yet more banking scandals

#10 Postby Alan H » August 29th, 2013, 5:17 pm

Nick wrote:
Alan H wrote:
Nick wrote:There was a very interesting article in last week's Sunday Times, by Dominic Lawson (sadly behind a paywall, but I've kept the paper article if anyone is interested...) the gist of which was, "so bankers have ripped people off by offering insurance against a non-existent threat (card fraud), but what about the alternative health peddlars? Shouldn't they be hit just as hard?"
We see that same fallacious argument used by those very same pedlars of quackery. The colloquial term for it is 'whatabootery'.

Er.... I'm not sure we are understanding each other. Lawson wasn't defending bankers, but attacking quacks. So I don't think your point (if I've understood it...) is actually valid.

Or have I still misunderstood...
Not having access to the article, I was just going on what you said. However, why did he link bankers to quacks?
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Re: Yet more banking scandals

#11 Postby Nick » August 30th, 2013, 4:18 pm

Alan H wrote:Not having access to the article, I was just going on what you said. However, why did he link bankers to quacks?

I'll mail a copy to anyone who wants one. :)

He linked those who sold "solutions" to non-existent problems (eg credit card fraud) to those who sell non-working solutions to real problems. He was using the credit card scam (which should have been stamped on a long time ago) as a jounalistic hook to ask why "regulators" seem quite happy to let other, bigger, more dangerous, scams continue.

thundril
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Re: Yet more banking scandals

#12 Postby thundril » August 30th, 2013, 10:50 pm

Poor lil bankers need help too!
Apparently, if you want to use a Barclays card reader to collect for a charity, the bank won't just lend you a card reader for free; (you know, the way companies help out good causes, and they get kudos for it?) Not at all. Apparently what Barclays do is, they TAKE 50p off the top of each donation. So, if you want to help the poor desperate bankers, , just put in some time and effort supporting a genuine good cause, and at the same time you'll be collecting for Barclays! Win-win or what?
I think this information is worth sharing around. Don't you?

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Alan C.
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Re: Yet more banking scandals

#13 Postby Alan C. » August 31st, 2013, 8:35 pm

Barclays are wrong to do this but bloody hell! Does nobody use cash anymore? We do for most things, groceries, petrol etc, only use plastic for big buys, it must be desperate for the supermarket [charity] bag packers.
Abstinence Makes the Church Grow Fondlers.

thundril
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Re: Yet more banking scandals

#14 Postby thundril » September 1st, 2013, 12:02 am

The charity in question runs a mentoring scheme, in which they pair up disabled youngsters with olympic athletes with the same disability. They had set up a stall inside a local supermarket. The charity has its account at Barclays, who supply them with card-readers. My GF gave them £20, and was charged £20.50. Apparently its some deal whereby the bank hires the card-readers to the charity, and collects the rent from the donors. You'd think, with them handling the charity's account, they would find some way to be less blatantly mercenary. Maybe even supportive. It wouldn't do them much harm...

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Alan H
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Re: Yet more banking scandals

#15 Postby Alan H » September 1st, 2013, 12:06 am

thundril wrote:You'd think, with them handling the charity's account, they would find some way to be less blatantly mercenary.
They're bankers. It's their job to be mercenary.

Maybe even supportive. It wouldn't do them much harm...
I'm sure they would have looked at the pros and cons, the benefits to their current and future business, the difference to their bottom line and decided on the only basis that matters to them... :D
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Alan H
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Re: Yet more banking scandals

#16 Postby Alan H » February 3rd, 2014, 6:44 pm

The price of PPI: what the banks have set aside to pay for mis-selling
Lloyds Banking Group's extra £1.8bn provision to compensate customers for past mis-selling of payment protection insurance (PPI) has taken the amount banks have set aside for the scandal to £22.2bn – enough to pay for the 2012 Olympics twice over.

The financial journalist Paul Lewis said on Twitter:
Banks set aside £22.2bn to repay missold PPI but this industrial scale fraud goes unpunished
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Dave B
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Re: Yet more banking scandals

#17 Postby Dave B » February 3rd, 2014, 7:25 pm

Alan H wrote:The price of PPI: what the banks have set aside to pay for mis-selling
Lloyds Banking Group's extra £1.8bn provision to compensate customers for past mis-selling of payment protection insurance (PPI) has taken the amount banks have set aside for the scandal to £22.2bn – enough to pay for the 2012 Olympics twice over.

The financial journalist Paul Lewis said on Twitter:
Banks set aside £22.2bn to repay missold PPI but this industrial scale fraud goes unpunished
If I had remembered this thread I would have added my post on RBS and the alleged business of them causing businesses to crash so they could buy them up.

Also Lloyds have got to find a further 1.8 billion to cover PPI miselling. Then they want to sell shares to the public - er, when do they pay us back for bailing them out?

And I fully agree with any idea that says bank directors should have a degree of personal responsibility for what their organisations do whilst they are in charge - and even after they have left if they made shady deals of any kind.

If there are shenanigans over NI payments -
A notice can be issued, where in the opinion of HMRC, there is sufficient evidence to show ‘on the balance of probabilities’ that the company failure to pay the National Insurance contributions due was attributable to the neglect of fraud of an individual who was an ‘officer’ of the company at the time of the failure. HMRC describes the officers as ‘culpable officers’ in the personal liability notice.


Directors are personally liable for certain actions taken while fulfilling their duties. Several laws give rights of action against directors in their personal capacity, including:

The Insolvency Act 1986 which leads to personal liability where directors allow the company to trade wrongfully or fraudulently.
The Health and Safety at Work Act 1974.
Laws relating to the control and disposal of hazardous waste.


So, there is precedence there for holding individuals personally responsible in other fields - why not banking? Because politicians (globally) are either shit-scared of their power or need their dodgy practices to boost their country's coffers? Who is the final victim in all of this (barring a comparative few who took risks with their own money, to make more, and have no legitimate moan)? Us.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015

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Nick
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Re: Yet more banking scandals

#18 Postby Nick » February 4th, 2014, 4:40 pm

Alan H wrote:The price of PPI: what the banks have set aside to pay for mis-selling
Lloyds Banking Group's extra £1.8bn provision to compensate customers for past mis-selling of payment protection insurance (PPI) has taken the amount banks have set aside for the scandal to £22.2bn – enough to pay for the 2012 Olympics twice over.


The financial journalist Paul Lewis said on Twitter:
Banks set aside £22.2bn to repay missold PPI but this industrial scale fraud goes unpunished

Though, as I've said before, I think the scandal is substantially less than the banks have been forced to accept, I have no problem with those at the top being charged. The court proceeding would be fascinating too.....

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Re: Yet more banking scandals

#19 Postby Nick » February 4th, 2014, 4:52 pm

Dave B wrote:Also Lloyds have got to find a further 1.8 billion to cover PPI miselling. Then they want to sell shares to the public - er, when do they pay us back for bailing them out?
Actually, it will be the government selling their stock of shares to the public, which they will do in stages to reflect the different prices paid for the shares. The "money" used to "pay for" the shares was only ever a creation on a computer spread-sheet. When the shares are sold, the creation will be reversed. The public never paid for the bail-out in the first place.

And I fully agree with any idea that says bank directors should have a degree of personal responsibility for what their organisations do whilst they are in charge - and even after they have left if they made shady deals of any kind.
Indeed.

If there are shenanigans over NI payments -
A notice can be issued, where in the opinion of HMRC, there is sufficient evidence to show ‘on the balance of probabilities’ that the company failure to pay the National Insurance contributions due was attributable to the neglect or fraud of an individual who was an ‘officer’ of the company at the time of the failure. HMRC describes the officers as ‘culpable officers’ in the personal liability notice.


Directors are personally liable for certain actions taken while fulfilling their duties. Several laws give rights of action against directors in their personal capacity, including:

The Insolvency Act 1986 which leads to personal liability where directors allow the company to trade wrongfully or fraudulently.
The Health and Safety at Work Act 1974.
Laws relating to the control and disposal of hazardous waste.


So, there is precedence there for holding individuals personally responsible in other fields - why not banking?
Indeed. I'd like to know. But, as is usual in such cases, the truth is likely to be somewhat different to what we might expect.

Because politicians (globally) are either shit-scared of their power or need their dodgy practices to boost their country's coffers?
Much more likely to be errors in the legislation and the conduct of the regulator, which might make prosecution somewhat difficult... Though I wonder if it might not be a pyrric victory anyway, as the public would be likely to suffer from the fall-out too.

Who is the final victim in all of this (barring a comparative few who took risks with their own money, to make more, and have no legitimate moan)? Us.
In terms of the credit crunch, yes, but in more direct financial terms, the original shareholders.

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Alan H
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Re: Yet more banking scandals

#20 Postby Alan H » February 4th, 2014, 5:00 pm

Nick wrote:
Alan H wrote:The price of PPI: what the banks have set aside to pay for mis-selling
Lloyds Banking Group's extra £1.8bn provision to compensate customers for past mis-selling of payment protection insurance (PPI) has taken the amount banks have set aside for the scandal to £22.2bn – enough to pay for the 2012 Olympics twice over.


The financial journalist Paul Lewis said on Twitter:
Banks set aside £22.2bn to repay missold PPI but this industrial scale fraud goes unpunished

Though, as I've said before, I think the scandal is substantially less than the banks have been forced to accept, I have no problem with those at the top being charged. The court proceeding would be fascinating too.....
And still unevidenced. However, the fallacy of appeal to personal incredulity, of course, but when have the banks ever admitted to a liability greater than they believed they were responsible for - and why?
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?


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