Britain’s five biggest banks sign up to new deal to curb bonuses

By
Daily Mail Reporter
Last updated at 6:56 PM on 30th September 2009

Britain’s five biggest banks have signed up to curb bonuses, it was announced tonight.Chancellor Alistair Darling welcomed their decision to accept the principles agreed at the G20 summit in Pittsburgh last week.The five - HSBC, Barclays, Lloyds, RBS, and Standard Chartered - have committed to implement the new rules, intended to link bonuses to long-term performance.
Chancellor Alistair Darling, pictured at the Labour party conference on Monday, welcomed the banks‘ decision
The changes will apply to bonuses paid out for performances in 2009.
Leaders at the G20 meeting last week said a significant portion of
bank officials’ potential compensation should be delayed and tied to
the performance of their investment decisions. They said excessive
compensation contributed to excessive risk-taking and the recent global
recession.The willingness of the big banks to sign up voluntarily to the Pittsburgh principles from the current year will come as a relief to Mr Darling and Prime Minister Gordon Brown.In his speech to the Labour Party Conference in Brighton on Monday, Mr Darling announced that he would introduce legislation to enshrine the new system in law.It prompted fears that the banks would try to get round the rules by rushing through big payments this year before they reached the Statute Book.
In his conference speech yesterday, Mr Brown attacked the banks for having lost sight of ‘basic British values’ and vowed to ensure that they repaid the taxpayer for last year’s bail-out.

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Judge quashes woman’s £8,000 credit card debt in ‘landmark ruling’ on mis-selling of payment protection insurance

By
Daily Mail Reporter
Last updated at 5:55 PM on 30th September 2009

A woman has won a landmark legal victory after a judge wrote off her 8,000 credit card debt because she had wrongly been sold payment protection insurance (PPI). A county court judge ruled that Lynne Thorius, 49, from South Shields, was charged thousands of pounds by MBNA for an insurance policy she had never asked for.The ruling could open the floodgates for millions of pounds worth of similar claims against banks and building societies.It is estimated that around 40 million PPI policies have been sold in
Britain in the last six years alone, making this the second biggest
selling insurance product on the market.
Landmark ruling: Lynne Thorius’s 8,000 credit card debt was quashed after MBNA charged thousands for an insurance policy she never asked for
Carl Wright, of claims management company Cartel Client Review, who successfully defended Lynne, said today that the ruling is a legal first.’This is the first time that a judge has ruled on this point and will have a massive impact,’ he said.’Consumers now have the authority of the court to bring a claim in such a way that banks and credit card companies will be unable to defend it.’MBNA acted in a disgusting manner. They harassed this woman at all hours of the day and night to force her to pay for something she never even asked for.’Now Lynne has won, the floodgates could open for millions of other people. This is a massive victory.’It will change the way banks lend money and issue credit cards. We went to court because we knew we had a strong case.’But MBNA thought their case was watertight. When we got to court our legal argument absolutely white-washed them, and their case against Lynne was thrown out.’  ‘This is a landmark decision for all Cartel clients and a demonstration of the strengths of legal argument used by Cartel.’  The mother-of-three applied for the card - which was branded Sunderland ASC but financed by MBNA - in July 2002.She ticked the box which said ‘no thank you’ to payment protection insurance on the application form, but despite this, the policy was initiated with a 20-a-month charge.The card had a limit of 1,500 and Mrs Thorius, a cleaning supervisor, used it ‘here and there’ to pay bills and buy gifts.But the credit limit was gradually extended and before she knew it, Lynne was nearly 7,000 in debt.She said: ‘I didn’t particularly want a credit card and I certainly didn’t want PPI. That alone was costing me a fair few pounds a month.’When I noticed it on the statement, I rang them and told them I didn’t want it. They said I wouldn’t have got the card if I didn’t tick the ‘yes’ box.’When I tried to explain that I hadn’t, they just wouldn’t listen.’  Mrs Thorius, whose PPI charge was gradually increased to 30, even tried to make a claim on the policy when her work hours were cut, but MBNA turned her down.With her debt soaring and with seemingly no way out, Mrs Thorius contacted the claims management company in December 2008, while MBNA launched a separate action against her, suing for arrears totalling 8,686.90.The bank even threatened a charging order to repossess her house, even though her debt was unsecured.In a nine-hour hearing at Newcastle-upon-Tyne County Court, Deputy District Judge Jacqueline Smart ruled that the PPI policy had been unfairly imposed.She also threw out MBNA’s case against Mrs Thorius because they earned commission on the PPI they ’sold’ her.It is the first time a judge has ruled such an arrangement to be in breech of the Unfair Relationships and Unfair Consumer Credit Act Section 78, according to Cartel.Mr Wright said: ‘They obviously didn’t realise how strong our legal argument was, otherwise they wouldn’t have gone to court.’She clearly ticked the ‘no thank-you’ box, but MBNA applied PPI on her account anyway.’It was an incredible victory for us, and one we are immensely proud of.’  Mrs Thorius added: ‘It was a horrible time for my family and I’m so glad it’s all over.’MBNA treated me appallingly from start to finish. I ticked no on the PPI option but they applied it to my account anyway.’When I had my hours cut at work from full-time to part-time and started to struggle to pay the bill, MBNA started calling me three or four times a day, even as late as 9.30pm or 10pm.’MBNA were rude on the phone and one person told me to get another job, while someone else said they would repossess my house.’  After news of the ruling broke, the FSA announced a package of tough measures to protect consumers in the PPI market.Jon Pain, FSA managing director of retail markets said: ‘Consumers should not be pressured or deceived into buying PPI and they are entitled to have a policy properly explained to them.’It is unacceptable that despite previous warnings about pool sales practices, backed by 22 enforcement cases and significant fines, the PPI sector still needs the FSA to intervene on this.’  A spokesman for MBNA said: ‘Cases in the County Court are not precedent-setting. Any such cases are decided on their individual merits and no two cases are the same.’

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The internet overtakes television in battle for advertising

By
Daily Mail Reporter
Last updated at 11:24 PM on 30th September 2009

Advertising spending on the internet has overtaken that on TV for the first time.

A record 1.75billion was spent online in the first half of this year, compared with 1.64billion for TV, a study found.
It is thought Britain is the first major economy where web advertising has overtaken TV. 
Internet hit: This advert for John West salmon, featuring a kung fu bear who tries to defend his catch, was very popular onlineTelevision had been the leading advertising medium for half a
century. But it has taken the web little more than a decade to surpass
it.
While internet spending grew by 4.6 per cent in the first half
of 2009 compared with the year before, TV advertising fell by 17 per
cent.
This means web advertising now makes up 23.5 per cent of the British market, with television on21.9 per cent.
The trend shows the growing popularity of internet businesses such as Google and Facebook with advertisers.

It also reflects the fact that many viewers can now watch television programmes over the internet.

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Australian bank tipped as L&G predator

By Ben Harrington, Mergers & Acquisitions Reporter

Published: 10:50PM BST 30 Sep 2009

FTSE 100



FTSE 250

Traders now believe National Australia Bank (NAB), which on Wednesday said it
had completed its acquisition of Aviva Australia Holdings (Aviva), is the
mystery Australian company stalking the British life assurance business.

The tale is that NAB, owner of Clydesdale Bank and Yorkshire Bank, could be
willing to pay up to 120p a share in cash for Legal & General. It is not
clear, though, whether NAB has made a formal takeover approach for Legal &
General.

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The Government has turned regulation into a cashraising enterprise

By Damian Reece, Group Head of Business

Published: 10:38PM BST 30 Sep 2009

The Financial Services Authority is cracking down on banks from Barclays to
Royal Bank of Scotland over everything from capital adequacy to greed to
their tax advice for clients. The Serious Fraud Office has BAE Systems in
its sights while the Office of Fair Trading has whacked Hays, a recruitment
firm, for £30m, an astonishing 50pc of its expected net profits.

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You can expect Kraft to sweeten its offer for Cadbury

By Damian Reece, Group Head of Business

Published: 10:34PM BST 30 Sep 2009

You can bet your last Creme Egg that Kraft won’t walk without making an offer.
All the signs are there. I hear the US food giant has recently asked HSBC to
help finance its bid, a sure sign that it’s busy corralling financial
resources ready for action. It’s going to need the firepower of the world’s
biggest banks to provide the cash for the deal, especially if it’s intending
to come back with a sweetened offer including more of the folding stuff and
less in the way of Kraft shares, a move which might help persuade Cadbury
investors to accept.

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Piracy cybercrime and climate change - bringing NATO and insurance together

By Lord Levene and Anders Fogh Rasmussen

Published: 10:31PM BST 30 Sep 2009

Maybe at second glance as well. But both are in the business of anticipating
and managing risk: Lloyd’s for the businesses and individuals that it
insures across the globe and NATO for its 28 member states.

We share a common goal – to adopt a fresh approach to managing risk and three
risks in particular: cyber-security, piracy and climate change. These are
not entirely new problems. What is new is the scale and the cost.

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Bankrupt Cayman Islands to get £38m bailout

By Rowena Mason

Published: 10:11PM BST 30 Sep 2009

After lengthy wrangling, the British overseas territory on Wednesday confirmed
that it has finally secured permission from the UK to obtain a CI$50m (£38m)
bail-out loan to plug a 35pc-40pc collapse in revenue this year.

The island’s government has also signalled that it is ready to cave into UK
conditions on slashing government expenditure
and an independent report on reform of its tax system that could see it start
to impose direct levies to obtain further loans worth CI$229m.

Richard Parchment, an adviser to the government in George Town, said a letter
would be sent to Britain with a formal agreement this week. Its severe
shortage of cash meant it was days away from being unable to pay its civil
service.

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Stamps to go up 3p to fill the black hole in Royal Mail finances

By
Sean Poulter
Last updated at 9:02 AM on 30th September 2009

Royal Mail is planning shock increases in the cost of postage, with
first class stamps rising by 3p, amid claims it is facing financial
disaster.
The controversial proposals are designed to rake in more than 100million from customers in a year.
The record increases have been sanctioned by the industry regulator
Postcomm as an urgent measure to fill an enormous black hole in Royal
Mail’s finances.

First and second class stamp prices will go up in AprilIt is claimed that unless the price hikes go ahead, the organisation will be unable to meet its obligation to provide a doorstep service to every home and business in the land.However, the official customer body, Consumer Focus, slammed the proposals as a ‘low blow’ and warned they would drive people away from using the post.Postcomm has accepted a plea from Royal Mail that the situation is so serious that it is necessary to tear up an existing regime that caps price rises.It has decided to allow a 3p increase on a first class stamp, which would take up the price from 39p to 42p - a rise of some 7.7per cent. The second class stamp would go up by 2p to 32p, which equates to 6.6per cent.Royal Mail is also pushing for big increases in other postal charges - an average rise of 4.7per cent -  that will hit both ordinary families and businesses. These is likely to mean that Special Delivery, parcels and PO Box addresses will be more expensive.News of the price rises, which would come into effect in April, comes as the postal system has been brought to its knees by a series of rolling strikes.Postal services across the country have been severely disrupted while there is a backlog of mail running to tens of millions of items.Some 130,000 members of the Communications Workers Union(CWU) are currently being balloted on calls for an all-out national strike.The crisis in the nation’s postal services is to be the subject of an emergency debate at the Labour Party conference in Brighton today.(wed)The Royal Mail claims its income has been devastated by a combination of the strike and a massive shift by consumers and businesses to email and internet transactions.Details of the proposed increases have not been announced by the Royal Mail. Rather they are buried in a document on the website of Postcomm.The chief executive of Consumer Focus, Ed Mayo, said: ‘This is paying for failure. ‘The only reason that to hike up the price of a stamp is because Royal Mail has failed to modernise as a business.   ’As a consumer watchdog, we do accept that the public is switching away from using the mail service, but increasing the price of stamps is not the answer. It can only make it more likely that mail volumes decline. ‘This looks like an attempt by the regulator to tear up the rules in order to let Royal Mail charge us more for stamps. This is a low blow from a regulator whose job it ought to be to protect the public. ’The price has increased year on year with no sign of an improvement in the service.  More recently its been getting worse than ever. ’Delivery times have become erratic and we’ve got the prospect of a national strike at Christmas to look forward to.  ’Royal Mail had better have a really good explanation for any increase, but consumers will take some convincing.’ The Daily Mail has learned that Royal Mail chiefs wrote to Postcomm on September 8 pleading for the right to impose inflation-busting price rises.The plea may well surprise customers, for as recently as May, the organisation reported that its annual profits almost doubled last year.The state-owned firm made a group-wide operating profit of 321m in the year to March 31, up from 162m a year ago. At the same time, tens of thousands of staff have lost their jobs in a mordernisation programme designed to make it more lean and efficient. However, the Postcomm document argues that the finances of the Letters side of the business are in a mess. Specifically, its income from mail is 1billion less than expected over the last three years. It points out: ‘Royal Mail has lost 9per cent of its mail volumes over the three year period to April 2009, largely through shrinkage of the total market including 20per cent of stamped mail.   ‘Postcomm estimates that this decline in volume has resulted in Royal Mail’s revenues for the year 2008-09 being approximately 1 billion lower than if volumes had stayed constant over this period.’  It adds: ‘Letters business profits have fallen in this period from over 300 million in 2005-06 to approximately 50 million in 2008-09, and mail volumes have consistently declined with a total reduction of around 2 billion over the same period.’  The regulator justifies its support for the price rises, saying: ‘Royal Mail Letters’ finances are weak and deteriorating.’  It states the price rises are vital to ensure the survival of the doorstep service, saying: ‘Postcomm believes that these proposals will discharge its statutory duties by balancing the overriding requirement that Royal Mail can continue to provide the universal postal service.’  And the regulator adds: ‘If the proposals are agreed …Postcomm estimates that they will enable Royal Mail to earn up to an additional revenue of approximately 100m to finance the universal postal service in 2010-11.’  As far as the impact on the public is concerned, Postcomm says it takes the view ‘there is no material detriment’. The shocking depiction of the Royal Mail’s financial position appears to be at odds with the massive rewards handed out to its chief executive, Adam Crozier, and senior managers.  Mr Crozier has been identified as Britain’s highest paid civil servant after picking up a package worth more than 3million in one year. Postcomm has made clear it supports the price rises which will be given the formal green light following a period of consultation over the next four weeks. Given that Royal Mail has been lobbying for the right to impose higher stamp prices, it is expected to implement the maximum possible increases in April. There is a small chance it will phase them in during next year.

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How we’re tightening our belts on food and drink spending

By
Sam Fleming
Last updated at 8:51 AM on 30th September 2009

Decline: Household spending is down 3.6 per cent - the biggest fall in 30 years
Spending on food and drink has fallen by the most since 1977 as the recession hits family budgets, official figures revealed yesterday. Spending on groceries tumbled by 4.6 per cent year-on-year to 16.3billion in the second quarter, according to the Office for National Statistics. Purchases of alcohol and tobacco slumped by 6.5 per cent, the largest decline since 1982. That helped drive overall household spending down by 3.6 per cent in the second quarter  -  the biggest retreat in almost three decades. The figures suggest the debt-fuelled spending boom that gripped Britain for much of this decade has been brought to a shuddering halt by the financial crisis. With unemployment running at 2.5million and companies freezing or slashing salaries, families are hoarding their cash and repaying debts. Households saved 13.4billion in the second quarter, the most since Labour came to power in 1997, yesterday’s figures showed. Some 2.5billion of that was used to pay off debts. Separate figures from the Bank of England showed that consumers continued to reduce debts in August, paying off 309million of unsecured loans. As a result, the savings rate  -  the share of incomes stashed in deposit accounts and share plans  -  rose to 5.6 per cent in the second quarter, the highest level since 2003. It hit a low of  - 0.5 per cent at the beginning of last year as Britons raided their savings accounts to sustain their lifestyles.

Many experts expect the saving rate to continue to rise in the coming months, as it returns to its 8 per cent long-term average. That is likely to ensure the economic revival remains muted. Danny Gabay, of Fathom Financial Consulting, said: ‘Households have been running a rate of consumption that they couldn’t afford for the best part of a decade. ‘Some semblance of payback is to be welcomed, if only because it means that when the recovery kicks in we will be in a more stable position. ‘Unfortunately, the extent to which we over-indebted ourselves means we could be in for a prolonged period in which consumer spending has to grow slower than the overall economy.’ Families cut recreational budgets and spending at restaurants and hotels by the most since 1991. Household incomes fell 0.4 per cent on an annual basis. 
All sectors of the economy saw sharp annual declines, with factory
production tumbling by 12.4 per cent and construction declining by 13.4
per cent. The
exception was public service activity, which slipped only 0.8 per cent.
As a result, overall economic output fell by a record 5.5 per cent in the second quarter compared with the previous year.
However, many experts believe the second quarter could prove the nadir of the recession. Estimates from the respected National Institute of Economic and
Social Research suggest the country returned to growth in the current
quarter. Hetal Mehta, economic adviser to the Ernst & Young ITEM Club
forecasting group, said: ‘The UK is still lagging behind other major
economies such as France, Germany and Japan that have already seen the
end of their recessions.
‘Even Italy outperformed the UK in the second quarter. Nevertheless, we
expect the economy to have resumed positive growth in the current
quarter.’ A separate survey reveals consumers are becoming more optimistic about the economy. The survey of 1,999 by pollsters GfK NOP for the European Commission shows confidence is at its highest level since 1998.

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