Will a banking investigation prove crunch time for the banks?

Robert, the discussion centres on personal current accounts, where building societies can act as banks.

I forgot to tell u I ask her dad to help

Couldn’t agree more!

I don’t think we can rely on parents giving their kids a good financial education, when some of them do not cope well themselves. I see it as the responsibility of the schools, though if the parents can do a better job, that’s great.

Wavechange:- Now you are going to embroil us in the “Benefits System” which the last Labour Government royally screwed up! Let’s keep on topic.

wavechange, schools should include the basics of personal finance in the curriculum but, in addition, many parents have sufficient financial knowledge to be able to help their children – and many will pass on their wise advice.

Life skills are best passed down within the family wherevever possible. Of course you cannot rely on it – as ignorance referred to in this conversation shows – but the nanny state cannot take on all such responsibilities and do them for us. We certainly should not rely on it’s abilities either – it presided over a mammoth financial crisis. There’s a partnership required here.

I did not bring up the topic of financial education, and it’s you that has mentioned the benefits system, Neil. I think it is very much on topic for young people to learn that many companies do their best to take advantage of their customers, whether legally or not. Not least the banks.

I’m very happy that there is going to be an investigation into the banking system. There is not much confidence in banking and finance according to the Which? Consumer Insight data: http://consumerinsight.which.co.uk/tracker?utf8=✓&d%5Bage_band%5D%5B%5D=&d%5Bincome_band%5D%5B%5D=&d%5Bregion%5D%5B%5D=&d%5Bdata_month%5D=1410&d%5Bfrom_month%5D=&d%5Bsort_by%5D=default&d%5Bopen_in%5D=trust&d%5Bv%5D=77

Malcolm – It’s great if parents are educated and pass on skills to their kids. With respect to financial advice, I was one of the lucky ones. I agree about the role of the parents, but if you look at how many of them are living in debt, they might not be good teachers.

The previous comment, with a link, was for Neil.

A good point, Malcolm. The current Maths curriculum goes only part way into budget planning, compound interest calculations and the difference between futures and gilts, let alone the skills of market prediction that alone can give one a true knowledge of inflation, share prices and political influence. Without these predictive financial skills, children are left floundering when they need to know exactly how much to set aside for a pension in 50 years’ time, or what proportion should be taken as a lump sum. And as for home finance: well! I (as a school governor) have never met a teacher who can persuade the average child to make a whole-market comparison when buying a new smartphone, or how to avoid the anchoring of mass advertising when buying sweetened cereals.

They are taught arithmetic, and how to make estimates when the calculator may have been mis-keyed. They learn set theory and Venn diagrams, to deal better with planning and choice. They are given the beginnings of spreadsheet construction, financial outcomes and budget projection, but what use are these when 2008 broke the markets?

What children don’t seem to realise is that the world is so rapidly changing that all citizens need a Masters in finance to follow the trends. Or they can read Which?, of course. But no, the government tells us that schools have so badly failed our nation that we are near the bottom of the table of advanced nations. What is needed is the very best of our teachers in every school, and each child performing well above the average. The consistent improvement in reading, writing and maths skills for the last two decades has clearly reduced even the brightest (are we allowed to use that word) children to incapacity. Unlike MPs, whose Public Schools taught them properly.

Wavechange – most of us live in debt, primarily a mortgage and a credit card, maybe a car. It is not living in debt that matters, it is how you arrange and manage that debt. The many (I would guess the majority) who do that well are good teachers. The bad teachers are those who use debt in ignorance or irresponsibly

I am well aware of the importance of management of debt. The number of people who fail to pay off their credit card each month, frequently use an overdraft, or even resort to payday loans suggests that education isn’t working as well as it should do. I don’t believe that we are acting as a nanny state trying to help those who don’t get good advice from their parents.

Maybe we need to get back to discussing current accounts, though I find education much more interesting.

Wavechange, very few people get into debt accidentally. Almost always, taking on a debt requires a deliberate action and usually a personal signature. Of course, sometimes people are scammed, tricked or persuaded into taking on a larger debt than they can afford to support, but this is rarely through complete ignorance. It’s not for nothing that online scams are most frequently aimed, not at the gullible, but at the gullible greedy, aiming to make an illegal ‘killing’ or earn impossibly high interest even though common sense (the wisdom of the people) says that it’ll all end in tears.

Then there are the desperate, of course, trying to hold things together through borrowing and with a wild hope that there’ll be a rescue sometime to avoid disaster. Such people know their situation all too well and haven’t gone into debt through ignorance. Given different circumstances, they would have avoided the situation. In answer to the question, “Why did you do it?” the answer – in honesty – is rarely “I didn’t understand” but all too often “It was the least bad of some terrible options.”

Finally, some people manage their lives badly because of addiction or other uncontrollable urges, and haven’t the self-control to live within their means. All of these kinds of people are much more likely to be well-enough educated already to know what they are doing when they are lucid, but don’t see solvency as a reasonable option in their position. In other words, it’s rarely an education issue, and even more rarely one that could reasonably taught in school.

Finally, given the billions spent on super-effective advertising, how would YOU teach people to make clear and rational choices when the psychologists and NLP Masters employed by the industry can counter any move towards rational choice with ease (and a huge budget)? To give two examples: look at the ‘traffic light scheme’ for food health labelling – and the food giants’ reaction; and look at the effectiveness of rules about advertising junk food and toys to children today. Public and charitable agencies are powerless when faced with this mass of misused money and skill; studies show that advertising influences choice far more than even strong peer-group pressures. And advertising compels most of us to buy high-markup goods by preference, whatever the effects on our budgets and health. How WOULD you stop this?

Thanks for that, David. I totally agree with what you have said about the power of advertising and the influence companies have over our lives. We should all be aware of the influence that companies over whichever government is in power. Perhaps if I had worked in industry I might have been sucked into accepting many things that I regard sharp practice. Some say it’s fine for us to have to shop around regularly for the good interest rates when our savings have been dumped into a zombie account or our car insurance renewal quotation is substantially above what a new customer would be offered.

I don’t understand the power of advertising, but it works. When introducing critical thinking skills to first year university science students we started by discussing some of the everyday advertising that is fed to the general public. My impression is that peer pressure, no doubt helped by the advertising, is a very important factor, especially among young people.

I should say that I have had very little involvement with people who have got into financial problems, but I do believe that schools have a role in alerting teenagers that there are commercial organisations waiting to exploit them.

What a pity that some don’t even recognise that we have a problem.

I hadn’t realised that universities had to spend a portion of their students’ precious learning time teaching them critical thinking skills; I had assumed that was a necessary faculty for gaining a place at a university. Clearly secondary education has also lost its way.

Most new science students will have become accustomed to compiling essays and other documents from material available on websites intended for the general public. Much of this material is of very poor standard and is sometimes biased. At university they are given access to peer reviewed journals, many of which are not available to the general public or schools, so new students need to learn about these and other facilities that are available to them as a member of a university.

Everyone is familiar with misrepresentation in advertising and in teaching it’s useful to start of with familiar concepts. A useful next step is to help students learn that much of the information on websites is of little use to them beyond if they are going to write a good quality report. Tied in with this is helping students to avoid plagiarism by presenting information in their own words and giving appropriate references, rather than copy and pasting – which is condoned in some schools.

Students who have a parent in education are often well ahead of the game.

The recent Conversation by Dr David Grimes is particularly relevant to critical thinking skills.

What they need to do is to try and correlate information gleaned from the Internet and see if several web sites say the same thing *without* copying from each other. This requires skill and possibly the use of specialist software that may become more commonly available in future.

To steer this back towards the topic of this list, a similar approach is needed for people making decisions about finances based on information gathered from the web.

Note for John Ward: schools today have to teach a very limited set of knowledge and skills, aimed almost solely at gaining the student good marks in examinations. Over the last three decades, following the results of a previous lax interpretation of what was required from schools, Ministers have concentrated on forcing schools more and more into an ‘ideal form’. Unfortunately, this form, the National Curriculum that powered it and the public perception of education have all become a powerful political tool to gain or retain the government.

Calling schools and teachers incompetent and forcing them to reform their methods and subjects has been so successful a ploy that the public now consider that all but a few schools cannot do their job. This is despite the very firm evidence that British education is among the best in the world at giving the masses what they need for adult life and giving those who enter higher education a good starting platform. ” ‘A’ level results continually improving for 16 years? Must be because the exams are getting easier, because we all know that teachers are incompetent.”

However, one of the results of all this manipulation is that most of what does not lead to good exam results in the short term is marginalized. This is not what schools want, but it is what they are forced to do. They are encouraged to deliver a ‘broad curriculum’, with proper attention to sports, civics, health, community and – yes – critical thinking skills; but time allocations for all of these are poor. It’s a very cynical political action to require schools to offer a ’rounded curriculum’, while forcing them to allocate time elsewhere – although they are strongly advised to open the premises for ‘community use’, with teachers giving time freely above their usual 60 hours a week to running clubs and sports, free adult courses and other ‘community initiatives’.

So please don’t call all secondary schools and teachers incompetent and accuse them of having ‘lost their way’. They are doing exactly as government orders, whilst also doing their best to follow the hinted guidelines also.

I thought the question posed was ” Will a banking investigation prove crunch time for the banks?”

I stated that a lot “complaints” about the banks were unfoundéd and a result of ignorance by the customer and that it was a parental responsibility to teach their children about financial matters.

We’ve now wandered off topic into education – nothing to do with “Will a banking investigation prove crunch time for the banks?”

I should have written: “..in financial matters and “real life””…….

You’re right, Neil, but these conversation (like those face-to-face) do wander off-topic. Pesumably, this divergence is now ended.

Oh dear, what a tedious waste of time. What on earth have the above comments got to do with the reformation of our banking system. All these self proclaimed educational gurus pontificating on something they know little about. Truly as the saying goes “fools names like fools faces always seen in public places”. What exactly is “real life”. Perhaps the pre- requisite is that we all need to read the Daily Mail and vote UKIP to experience this?

Firstly . I speak from experience as both a customer and a banker with two of the big four and 20 years experience.

Secondly. Teachers are in my experience amongst the worse in managing their finances. This is obviously based on past experience and in the 1970-90’s when Bank branches actually knew their customers.

I do believe that children should be exposed to the iniquity and problems that come with taking on debt without serious thought as to the what-ifs. Case studies should easily be available to ram home the downside of not having any emergency funds yourself or in the family.

It is established fact that the ability to reason about future implications by teenagers is impaired as this part of their brains are not developed until 20+. Therefore is there not a reasoned based argument that lending [and the habit of borrowing] cannot be offered until a person is aged over 21?

Feel free : )

I’m cautiously optimistic about this, though I recall learning that CofE had been investing its funds in Wonga until earlier this year. 🙁

Some people see saving purely as a way of accumulating sufficient money for a future purchase. Maybe that’s OK for school kids, but adults need to look further forward.

Having looked up the CofE involvement with investing in Wonga, it seems as if this was an unfortunate accident. If a respected organisation can make mistakes, it’s no wonder that the individual does.

The difficulty everyone has when investing in pooled funds such as Venture Capital, Unit Trusts, Investment Trusts, is knowing what they put their money into. Unless you scrutinise the investments in detail – and are aware of new investments – you can be indirectly investing in non-ethical businesses. In the case of big investors, like the C of E, they should invest directly, not through pooled funds, if they want to be sure to maintain an ethical position.

The problem was it took the C of E 5 months to dispose of the fund that included Wonga – because they did not want to lose money. Is that an ethical position to adopt? Is the principle not more important?

We’ve now wandered off topic again – nothing to do with “Will a banking investigation prove crunch time for the banks?”

I agree about the problem, Malcolm, and it’s even more difficult when we have no input into how money is invested, for example with pension funds.

Periodically companies are taken to task for causing environmental damage, exploiting child labour and the like, but that’s tinkering with a much bigger problem and most investors will only be looking at whether they are going to get a good return on their money.

You are absolutely right Neil. Except the C of E is something to do with crunch time for banks – in at least two respects:
1. They proposed entering the money lending market, so would become a potential competitor hopefully with, for many, the social conscience they desire.
2. Understanding the way finances operate is important in assessing which banks’ current account structures best suit you. C of E proposes to promote education to help this.
Against that is the ethics involved – is an organisation that invests in dubious business (remember, too, it, like banks, lost a lot of money years ago with poor investments) in need of cleaning up its act also?

Reverting back to topic there is seemingly much to celebrate for banking customers, The FCA have joined forces with a new regulator namely The Prudential Regulation Authority who are working to bring about changes to comply with a new EU directive.

Plans to protect customers deposit accounts by separating banking investments are scheduled to come into force by 2019 and new proposals to protect deposits by increasing the current £85,000 to £1m are in the pipeline.

With a general election on the horizon one can’t help but question how these plans will be affected. Perhaps Which? Convo could speak with The PRA’s CEO Andrew Bailey and persuade him to produce a brief, verifying his future plans in order to allay some of the anxieties and fears expressed by participants to this very controversial subject.

Thanks Beryl. That’s very encouraging news.

Beryl, I believe the £1m limit is for a relatively short period and e.g. for people who sell a major asset such as their house and will be reinvesting the money in another property.

You could well be right Malcolm but even this is a step in the right direction. According to a BBC Report on the 6th October “The PRA is also planning to create a ‘seamless’ process of transferring accounts from a failed bank to a new provider so that even if a bank goes bust customers will be able to withdraw their money as usual within 24 hrs.” You can read the full BBC Report on their website. More clarification would be welcome I’m sure from the PRA.

The BOE have issued a more comprehensive report on BankofEngland.co.uk ‘BofE announces proposals to strengthen the financial system through structural reform.’

That customer has no issues has more m than me…. I lied I need her more now than ether?

“The money taken out for fines could conceivably have been used to improve customer service – pause for laughter.”

ROFLMAO!

Yes, there needs to be more personal responsibility for what people do at work. People having no responsibility equals “only obeying orders” which is supposed to have gone out of fashion a long time ago. Presumably if one bank employee was told to rob a competing bank at gunpoint, and he went and did it, he would be punished. So why not for these other offences?

I forgot to say for my own personal use

The person in charge would probably not even know. But the person who did it obviously did know and should bear some of the responsibility. Whether a custodial sentence is really helpful or a worthwhile expenditure of taxpayer money is another matter, though. A judicially enforced financial contribution from the employee to the customer may make more sense from several viewpoints.

Another distinct possibility is that no human has had anything to do with it. A computer could have been programmed to make these PPI charges as soon as the loan or overdraft concerned was keyed in by the human operator. If this is the case, then whoever instigated this programming needs some form of reprimand. It would obviously be beyond the finances of an individual to make reparation to the huge number of customers concerned, but a sensible form of punishment wouldn’t go amiss.

I vaguely recall that the costs of keeping someone in prison equal the costs of keeping someone in a private school. If this is true, then prison sentences shouldn’t be handed out willy-nilly.

Imprisonment may be expensive but would send a message to the banking community that would would be more effective than any other action. Imagine the publicity if even one high profile banker was to be imprisoned.
The PPI situation seems to have been prevalent across a wide spectrum of the banking community. It seems unlikely that the programers wouldn’t have been directed from above.

Imprisonment for a criminal offence should certainly be applied. The danger is finding who is actually responsible – and whether the “culprit” was acting “under orders”. We don’t want scapegoats. You could argue the managers and directors are to blame for overseeing the practise. However in many cases it seems the bankers have not committed criminal offences but manipulated a system. I would argue that personal financial penalties – removal of past bonuses, salary reduction (with no back-door methods to make them up) would be a deterrent – applicable to all those directly involved, their managers and directors. We want to stop underhand practises, not make money from the perpetrators. So make it not worthwhile – maybe that would change a culture?

We seem riddled with bad practise as a society – I’ve just been reading about a local authority that paid out £ hundreds of thousands to individuals to prevent them speaking out about malpractice. “Gagging”. Some made redundant. How on earth can we stop his apparently legalised blackmail that allows our public servants to get away with fraud and incompetence?

I was under the impression “gagging” arrangements had been banned by Pickles but for the nitty-gritty this Parliamentary committee reveals a lot:

http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/confidentiality-clauses-por/

As for prison terms – the Directors are paid to manage the busibess nad if it is under their reign that abuses occur they should be the obvious guilty parties.

To the query surely they cannot know everything I agree, however they should ensure that all systems are designed to prevent ” the progammer adding PPI”.

Simply, if any action adds costs to the customers then it needs to be 100% squeaky clean. The best way to make this happen is to make the Directors, who are paid vast amounts, primarily liable.

The selling or blatant mis-selling of currency swops tied to loans would definitely also fall into this area. Where staff are being paid bonuses to increase income, or more often threatened with loss of job if they fail to meet targets, that sytem almost guarantees that the wageslave will be not considering the ethics or correctness of the product for the customer.

The Directors own salaries, increase in share price, Long Term Incentive Plan, etc are also tied to income and profit. Their incentive to control abuses in selling is therefore minimal. Personal liability has to be the answer, along with banning from being a Director of any company, or acting as an advisor or consultant to any company.