News Article | May 14, 2017
The government is expected to sell off its remaining shares in Lloyds Banking Group in the coming week, marking a watershed moment for the sector after the financial crisis. Eight years after pumping in £20bn to prevent the bank from collapsing, taxpayers will no longer own any shares in an institution that was created in the depths of the financial crisis when Lloyds TSB rescued HBOS. The share sale, in the midst of the general election campaign, will highlight the contrast between the progress of Lloyds and that of Royal Bank of Scotland, which is still 73% owned by the government and has yet to make an annual profit since its bailout. At its peak, the taxpayer holding in Lloyds stood at 43% and first started to be scaled back in September 2013. Last week, the bank’s chairman, Lord Blackwell, told shareholders at its annual general meeting that the stake had fallen to 0.25%, with those final shares expected to be disposed of in the coming days. They will not be sold with the fanfare envisioned by George Osborne when he was chancellor. He had ambitions for a discounted share sale to the public, which had to be abandoned a year later by his successor, Philip Hammond, because of the fall in the bank’s shares after the Brexit vote. Instead the shares are being sold off on the stock market through the investment bank Morgan Stanley at prices below the 73.6p average that taxpayers paid during the three-stage bailout that began in January 2009. Hammond has said that despite some of the shares being sold at a loss, the government has still recouped all the £20.3bn used to buy shares. However, that does not take into account the £3.6bn cost incurred by the government although the bank’s chief executive, António Horta-Osório, told last week’s AGM that the government would make at least £500m from the bailout. The return to the private sector has led to 57,000 job cuts – in part because of cost-cutting implemented in the merger but also subsequent efficiency drives to boost profitability. The bailout also required a restructuring of the bank. While a competition inquiry was averted after the HBOS deal was clinched at the height of the crisis, the EU required 600 branches to be sold off. Those TSB branches are now owned by Sabadell of Spain. Lloyds still has a 25% share of current accounts, 22% of retail deposits and 21% of the mortgage market, largely through Halifax. The recovery of Lloyds has also been held back by a bill of more than £17bn to compensate customers missold payment protection insurance (PPI) – about half the industry’s total. Horta-Osório, who has been paid more than £30m since becoming chief executive in 2011, will now face questions about his own plans. He has focused the bank on the UK, which now accounts for 97% of its business, after retreating from 30 countries to six. The Portuguese banker is also expanding into credit cards, buying MBNA for £1.9bn to increase Lloyds’ market share from 15% to 26%, at a time when concerns are being raised about the speed of consumer credit growth. Horta-Osório is also facing anger from businesses hit by the loans scam at the HBOS branch in Reading. Six people were jailed in February after a jury heard they splashed out on superyachts and sex parties, while destroying businesses they had been lending to. Lloyds has set aside £100m to compensate 64 victims including the TV presenter Noel Edmonds but is facing questions about whether it will be enough. September 2008 A £12bn takeover of HBOS by Lloyds TSB comes just days after the collapse of Lehman Brothers sent shockwaves through financial markets. The Financial Services Authority, then the City regulator, says the deal will “enhance finance stability”. October 2008 As financial instability mounts the government announces a bailout of the banking system. Lloyds TSB renegotiates the takeover of HBOS to 0.605 Lloyds TSB shares for every one HBOS share, from 0.833 a month earlier. January 2009 Lloyds Banking Group is created from the purchase of HBOS by Lloyds TSB. The government begins first of a three-tranche bailout of the group, pumping in £13bn. May 2009 Sir Victor Blank is forced to step down as chairman of Lloyds. June 2009 The government puts in another £1.5bn. December 2009 The government backs cash call, buying £5.8bn of shares. Total rescue deal amounts to £20.3bn. Taxpayer stake stands at 43%. March 2011 Eric Daniels leaves and António Horta-Osório takes over as chief executive. May 2011 Lloyds takes first provision for payment protection insurance of £3.2bn. The bank’s bill eventually tops £17bn. November 2011 Horta-Osório takes leave, citing fatigue. He returns to work in January. September 2013 The taxpayer stake gradually reduces from 43% to 39% for technical results. It is cut to 33% when a formal sell-off of Lloyds shares begins: £2.3bn of shares sold to big City investors at 75p a share. March 2014 £4.2bn of shares sold at 75.5p, taking the taxpayer holding to 24%. February 2015 Dividends to resume for first time since the bailout. December 2014 George Osborne announces a plan to dribble out shares into the market. October 2015 Osborne unveils plans for a cut-price sale to the public. October 2016 Philip Hammond, the new chancellor, abandons his predecessor’s pledge to sell cut-price shares to the public. May 2017 The taxpayer is expected to exit Lloyds Banking Group.
News Article | April 28, 2017
The NatWest banking app failed to work for nearly an hour on Friday morning. Many customers complained on social media that payments and money transfers had not been getting through. The RBS Group, which owns NatWest, said: "Our mobile apps and online banking are now running as normal and delayed payments are starting to credit customer accounts. We apologise for the inconvenience caused." A spokesman added that no customer would be left out of pocket. The issue with payments affected only NatWest, not Royal Bank of Scotland or Ulster Bank. It only affected some payments made from NatWest accounts. People's incoming salaries were unaffected, the group said. The bank has not yet issued an explanation for the problem. "You transfer money from a #Natwest account to another and it just disappears into thin air," one customer tweeted during the outage. Another described it as an "absolute disaster".
News Article | April 18, 2017
Philip Hammond has signalled that the government is facing a multibillion-pound loss from selling off its 73% stake in Royal Bank of Scotland. The chancellor told MPs that that “we have to live in the real world”, as he indicated that the remaining shares could be sold below the 502p average price that was paid for them during 2008 and 2009 when £45bn of taxpayers’ money was pumped into the Edinburgh-based bank. Shares in the bank – which has reported nine consecutive annual losses since its rescue by the taxpayer – are trading at about 224p. This is the first time Hammond has acknowledged that the shares are likely to be sold at a loss to the taxpayer, although Hammond’s predecessor George Osborne sold off a 5% stake in 2015 at 330p a share – a £1bn loss. Hammond said: “The government is not at present actively marketing its stake in RBS. Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous government paid for them. “We have to live in the real world and make decisions on the future of our holding in RBS in the best interests of taxpayers.” He has previously described the stake as a long-term asset and any further sell-off as being hindered by the uncertainty surrounding selling off 300 branches as mandated by the EU and a fine by the US for mortgage bond mis-selling in the run-up to the financial crisis. In contrast, the government has reduced its stake in Lloyds Banking Group from 43%, when it invested to prop up the company during the financial crisis, to less than 2% and has sold off £12bn of Bradford & Bingley mortgages.
News Article | April 26, 2017
I recently noticed that my daughter’s Young Savers account, which was attached to my NatWest accounts, had disappeared from my online banking page. On calling the bank, I was told the account didn’t exist. Luckily, I managed to dig out an old statement, at which point NatWest agreed that it had existed but had been closed due to inactivity. The £3,161.66 that was in it had been withheld by the bank. I received no notification of this and the bank was unable to provide even basic information as to why the account was closed, or why the funds were not repaid. If I’d not been on the ball, I suspect the lost funds would have simply gone unnoticed! Is the Royal Bank of Scotland so desperate that it needs to take money from a seven-year-old? PL, Hounslow, Middlesex NatWest, along with many other banks, deems an account dormant if it has been inactive for five years or more. The logic is that the account may be vulnerable to fraud if the owner is not keeping a close eye on it. If the account remains dormant for 15 years, the funds pass to the government’s Unclaimed Assets Scheme and are distributed to charitable causes, though they can be reclaimed at any time by the account holder. The extraordinary thing is that NatWest alerts holders of inactive accounts just once, by letter, warning them that their account is being suspended. If they don’t hear back within nine months the funds are removed. Once an account is dormant, it disappears from the central database accessed by call centre staff so they can’t see it. The bank says it is “looking at ways to improve how customers are contacted” and exploring revolutionary ideas, such as text or email. It has now repaid your daughter’s savings. If you need help email Anna Tims at firstname.lastname@example.org or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Include an address and phone number.
News Article | April 21, 2017
The government has recouped the £20.3bn it ploughed into Lloyds Banking Group during the financial crisis, the chancellor has said. Just days after admitting that the taxpayer faced multibillion-pound losses on its stake in Royal Bank of Scotland, Philip Hammond said the government had now “recovered every penny of its investment in Lloyds”. Speaking on the sidelines of the International Monetary Fund meeting in Washington on Friday, Hammond said the government was “not in the business of owning banks” and on the brink of selling off the last of its stake. The Treasury is able to make its claim by including £400m in dividend payments received from Lloyds as well as from selling shares in the bank. It also does not take account of the £3.6bn cost incurred to bail out out the bank, although the Office for Budget Responsibility has said it still expects the government to make £100m when fees from Lloyds are included. The taxpayer stake stood at 43% at its peak and, according to Hammond, now stands between 1% and 2%. The City expects the remaining shares to be sold in the coming weeks. António Horta-Osório, the bank’s chief executive, said it was a “moment of huge pride for all of us at Lloyds” that the government could say it has already reclaimed its money. Even so, it has taken much longer than expected during the financial crisis and has only been possible because Hammond was able to sanction the recent sales at a loss because of profits made from earlier transactions when the share price was higher. The repayment has not been achieved in the way Hammond’s predecessor, George Osborne, envisaged. Osborne promised a discounted share offering to the public which had to be abandoned last year amid market turbulence. Instead, the shares have dripped out to the stock market. Hammond said: “We are now past the point where we have recovered the taxpayers’ investment. We still hold a small shareholding of between 1-2% but the taxpayer has now recovered every penny of its investment in Lloyds. “Recovering all of the money taxpayers injected into Lloyds marks a significant milestone in our plan to build an economy that works for everyone. While it was right to step in with support during the financial crisis, the government should not be in the business of owning banks in the long term.” On Tuesday, Hammond admitted the Treasury had little hope of selling its 73% stake in RBS above the 502p average price per share paid during the financial crisis. RBS shares were trading around 240p on Friday with Lloyds trading at 64p, below the 73.6p average price paid during the financial crisis. Both banks will publish their results next week for the first three months of 2017. Lloyds has already admitted it will have to take a fresh £350m hit for the payment protection insurance mis-selling scandal – taking its total bill to more than £17bn.
News Article | April 28, 2017
Royal Bank of Scotland has reported its first quarterly profit since 2015, as its management hopes it has started to turn a corner after nine years of losses since its £45bn bailout during the financial crisis. The bank, 73% owned by the taxpayer, reported a £259m profit in the first quarter of 2017. The last time it turned a quarterly profit was the third quarter of 2015. It warned that profits would be down in the next quarter, however, because of a slower start in its investment banking arm. Its shares rose 2% to 258p, but this remains well below the 502p price on which the taxpayer breaks even for bailing out the bank. The contrast with Lloyds Banking Group, also bailed out during the crisis, is stark. As RBS was announcing its results, it was disclosed that the taxpayer stake in Lloyds – which stood at 43% at its peak – had fallen to below 1%. The chancellor, Phillip Hammond, declared last week that the government has recouped the £20.3bn that was ploughed into Lloyds and admitted the government would have to sell off the remaining RBS stake at a loss. Ross McEwan, the RBS chief executive, said there was no need for an apology. “I don’t think it’s a matter of an apology; we just have to go back to when the government stepped in. The price that was paid was the price of the day. It was the right thing to do to save the bank,” he said. He expects RBS to make a full-year profit in 2018 after incurring another loss this year, its 10th consecutive loss since the bailout. McEwan said: “This bank has a very strong core with great potential, and we believe that by going further on cost reduction and faster on digital transformation, we will deliver a simpler, safer and even more customer-focused bank, with a compelling investment case.” He highlighted the fall in costs for misconduct, the increase in income in the core bank and a reduction in costs – which will fall by £750m this year – which helped generate an operating profit of £1.3bn during the first three months of the year. Some 16,000 jobs have been cut in the past year – taking the total number of employes to 76,200 – and more branches will be shut on top of the 158 closures announced last month. Landmark offices in London have also been shut. The bank is being held back by potential multibillion-pound fines in the US over the mis-selling of residential mortgage backed securities (RMBS) in the run-up to the 2008 financial crisis and the continuing uncertainty over the way it will appease the EU over the disposal of 300 branches - called Williams & Glyn (W&G) – which were mandated because of the bailout. “Subject to dealing with RMBS and W&G this year, we anticipate being profitable in 2018, and are on course to deliver our targets for 2020,” said McEwan. The bank is preparing to go to court next month to defend a case being brought by shareholders over allegations they were misled during a fundraising in 2008. The investors are calling former chief executive Fred Goodwin to give evidence. While the bank’s legal charges were £54m during the quarter – up from a year ago –they were lower than the £4bn incurred in the last quarter of 2016. Even so, RBS still highlighted a number of legal matters including the Russian money-laundering scandal reported by the Guardian. “Allegedly certain European banks, including RBS and 16 other UK-based financial institutions, and certain US banks, were involved in processing certain transactions associated with this scheme,” RBS said, adding it was “responding to requests for information from” regulators.
News Article | May 5, 2017
More than six out of 10 Pearson shareholders have voted against the £1.5m pay package awarded to the embattled chief executive, John Fallon, after the educational publisher reported the largest annual loss in its history. Fallon received a 20% pay rise last year, including a bonus of £343,000, despite the company recording a record loss of £2.6bn. Disgruntled investors expressed their anger at the company’s annual general meeting in London on Friday, with 61% voting to reject the remuneration report and nearly 7% abstaining in the non-binding vote. According to corporate governance group Manifest, the protest was the largest shareholder rebellion at a FTSE100 company since 90% voted against Sir Fred Goodwin’s pension arrangements at Royal Bank of Scotland in 2009. In 2012, Sir Martin Sorrell, the chief executive of WPP, suffered a humiliating defeat when nearly 60% of investors rejected his pay packet at the company’s annual general meeting. In a bid to placate investors, Fallon, who has faced calls to step down, has invested his bonus in Pearson shares as a show of confidence. “I am the son of a teacher; several members of my extended family are teachers. I understand how privileged and lucky I am to have the level of remuneration that I have,” Fallon said. “I understand what chief executives are paid. I decided that the right thing to do was buy shares in Pearson.” On Friday, the Pearson chairman, Sidney Taurel, said that he and Coram Williams, the finance chief, would increase their shareholdings in the company. There was a significant protest against the company remuneration policy, which was up for a binding vote this year, with 36% either rejecting it or abstaining. One investor at Pearson’s annual meeting accused the board of being “asleep on the job” and said the remuneration strategy had “manifestly failed and has been paying for failure”. “We do not need millions of pounds paid for shoddy performance such as we have seen at this company,” he said. The investor revolt follows Pearson reporting a record pre-tax loss last year, after a slump in its US education business. Despite the poor performance of the company, staff still shared £55m in bonus and incentive payments as Pearson reached some goals including profit targets. Taurel defended the payouts to Pearson’s top brass, saying operating profits had come within guidance despite a difficult 2016 for the business overall. Fallon, who slashed 4,000 jobs last year, 10% of Pearson’s global workforce, said the company intended to make more job cuts as part of a new £300m cost-cutting programme by 2019. He would not be drawn on numbers. In January, the company slashed its profit forecast for this year by £180m and scrapped its target of £800m next year. However, Pearson’s share price shot up more than 12% on Friday after the company pleased investors with its trading update for the first quarter of 2017. In a rare bit of good news, the company said revenues had surged 6% compared with a fall of 4% in the same quarter last year and it planned to sell the K12 courseware publishing business in the US. The company is currently in the process of selling its stake in Penguin Random House, which sells titles ranging from Fifty Shades of Grey and The Girl on the Train to Nigella Lawson and Jamie Oliver’s recipe books, for more than £1.2bn. An investor criticised the move as “selling the family silverware” to prop up the rest of Pearson’s business. Taurel said the sell-off of Pearson’s consumer publishing assets – including the Financial Times and its stake in the Economist – was a “strategic decision and not taken lightly”.
News Article | April 26, 2017
Brexit has set a hungry cat among the financial pigeons of the City of London. No one yet knows what kind of access to the European Union’s single financial market UK-based firms will have, and Theresa May’s call for a general election to be held on 8 June has further clouded the picture, at least in the short term. But there is a nagging assumption that things cannot remain the same, and that there will be a price to be paid for leaving the EU. So UK-based financial services firms, especially those that have chosen London as their European headquarters precisely in order to secure access to the whole EU market from one location, are reviewing their options. Indeed, regulators are obliging them to do so, by asking how they will maintain continuity of service to their clients in the event of a “hard” Brexit. (May’s government prefers to talk of a “clean” Brexit, but that is semantics.) Rival European cities have spotted an opportunity to claw back some of this business to the continent (or to Ireland). Other governments have long resented London’s dominance. It was galling to have to acknowledge that the principal centre for trading in euro-denominated derivatives lay outside the eurozone. Just a few years ago, the European Central Bank tried to insist that the clearing of euro derivatives should take place within its jurisdiction, but was prevented from doing so by a ruling from the European court of justice. That is somewhat ironic: removing the UK from the ECJ’s jurisdiction is now one of May’s principal aims. So delegation after delegation of ministers, mayors and assorted financial centre lobbyists have been filling London’s best hotels and providing a welcome boost to the high-end restaurant trade. Luxembourg, Frankfurt, Dublin and others have been making glossy presentations about their cities’ competitive advantages over London: lower property costs, lower corporate tax rates, Michelin-starred restaurants, and Porsche dealerships – all the essential services that make up a vibrant financial centre. Some of these presentations have raised a wry smile or two. The French president, François Hollande, was elected on a claim that the world of high finance was his enemy. Yet the Socialist mayor of Paris recently promised a “red, white, and blue carpet” for any hedge fund manager who buys a one-way Eurostar ticket to the Gare du Nord – a barbed reference to David Cameron’s promise of a red carpet for French bankers fleeing prohibitive tax rates, strikes and restrictive labour laws. Suddenly, everyone loves those masters of the universe who nearly destroyed the world’s financial system in 2008. What goes around comes around. All this promotional activity has raised anew the question of just what combination of characteristics a successful financial centre must have. The question has been asked many times, and management consultancies have earned good money offering their patent answers. A pre-crisis study by McKinsey for former New York mayor Michael Bloomberg recommended copying London’s regulatory system, which blew up soon thereafter. Hong Kong officials’ review of their own regulations, carried out to identify ways to boost the city’s attractiveness to international firms, found that what firms really wanted was cleaner air and more international schools. Neither is within the jurisdiction of the monetary authority (or even, in the case of air pollution, of the Hong Kong government). Many of the surveys asking firms why they choose a particular location produce essentially circular answers. They say they are there because other firms are, and they can therefore conduct business easily with their principal counterparties. There are, however, a few consistent themes. Foreign firms like to think that they are treated no differently from domestic competitors. So politically driven regulation is a turn-off. They also want an independent court system that upholds property rights. And they want access to skilled staff. On these measures, London and New York continue to do well. The latest Global Financial Centres Index, published last month by Z/Yen, shows that London remains at the top of the league, marginally ahead of New York. But the ratings of both have declined sharply over the last year, and the gap between them and third-place Singapore, more than 30 points last year, is only 20 this year. Indeed, almost all of the Asian centres have lifted their ratings, with Beijing rising the fastest, moving from 26th to 16th place. If we look specifically at Europe, the only other financial centre in the global top 20 is Luxembourg, which creeps in at 18, six places lower than last year. Frankfurt, at 23, fell four places this year, and Paris has been stuck at 29 for the last couple of surveys. So London has a huge lead in Europe. Will Brexit be enough to alter that picture fundamentally? It remains hard to say. On the key factors for firms, London’s nationality-blind regulatory system is not likely to change; nor is the court system. So those advantages should be sustained. The key swing factor is likely to be the availability of skilled staff. London-based financial firms are accustomed to being able to recruit from across the EU; indeed, the British authorities have been flexible on non-EU staff, too. Because most aspiring finance professionals in Europe can speak good English, firms have had a deep pool in which to fish. Whether that pool survives Brexit will turn out to be the biggest political question for the City of London in the coming negotiations. The next UK prime minister, who just might be May, will need to produce a good answer, or London will not remain at the top of the league for much longer. • Sir Howard Davies, the first chairman of the UK’s Financial Services Authority (1997-2003), is chairman of the Royal Bank of Scotland. He was director of the London School of Economics (2003-11) and served as deputy governor of the Bank of England and director general of the Confederation of British Industry.
News Article | April 29, 2017
Perhaps you are looking for a more ethical home for your current account cash. Or maybe you are a Co-operative Bank customer who is considering closing your account following its well-publicised troubles. If either of those sound like you – or perhaps you simply don’t want to give your money to one of the “big four” banks – then as of this week there’s a new option. Triodos, which bills itself as “Europe’s leading sustainable bank”, has taken the wraps off its first-ever British personal current account. The bank is allowing people to register their interest, and in June it will begin sending out invitations to those who have registered to apply for an account. Founded in the Netherlands in 1980, Triodos set up an office in the UK in 1995 and has been offering savings and investments here for some years. It now has almost 50,000 UK customers, and more than half a million across Europe. It offers current accounts in the Netherlands, Spain and Germany, and says it is now finally ready to launch a full banking service in Britain. Triodos’s USP is that it only lends money to organisations and projects that are “making a positive difference to society”, whether’s that’s socially, culturally or environmentally. It publishes details of every loan it makes via its website, and its borrowers have included chef Hugh Fearnley-Whittingstall’s River Cottage HQ, and Worthy Farm, home to the Glastonbury festival. “We want people to really think about what their bank is doing with their money. Money doesn’t have to be invested in the arms trade, fossil fuels and tobacco – it can be used to do good things that help build the society we want to live in,” says the bank. Triodos’s green credentials are impeccable, but there is a stumbling block: all customers have to pay a £3 monthly fee (ie £36 a year) for the current account service. That may well prove to be a deal-breaker for some, particularly as the bank isn’t offering any upfront financial incentives to tempt people to sign up. Triodos is entering a hugely competitive market. Just two days ago M&S Bank announced that new customers who switch to one of its current accounts – there is one with no monthly fee, and one costing £10 a month – will now get up to £185 to spend in M&S. They initially receive a £125 gift card, which will then be topped up with £5 each month they deposit £1,000-plus in their account during the first year. Meanwhile, Halifax has a no-monthly-fee Reward account, where you get a £3 payment each month you pay in £750 or more, plus a £75 switching inducement. This week the Halifax said official figures showed it was “the most switched-to bank on the high street”. So what is Triodos offering? This is a current account that will work in all the ways you would expect, and can be opened by any UK resident aged 18 or over who meets the eligibility criteria. The account is operated online and via a mobile app. Triodos is not providing a telephone banking service, though it will offer phone-based support, and while it has offices, there are no high street branches. The account comes with a contactless Mastercard debit card made from PLA, a “natural plastic”, which can be used to make payments, cashpoint withdrawals etc. You can request a chequebook and apply for an overdraft, though the £2,000 maximum is lower than that offered by many other banks. The authorised overdraft rate is 18% EAR, which is competitive but not top of the market. Triodos won’t charge anything extra for setting up and using an overdraft. Someone banking with Triodos with an authorised overdraft of £600 used for seven days each month would incur charges of £23.06 a year, compared with £84 at Santander and Halifax, and £97.24 with NatWest/Royal Bank of Scotland. The bank will not allow unauthorised overdrafts – it will simply not pay items when there are insufficient funds. Unpaid items will incur a £5 charge, with a maximum monthly charge of £50. Triodos claims that for many years people have been able to make positive choices about things such as food, energy and transport, but not banking. The Co-operative Bank might have something to say about that – it is the only high street bank with a customer-led ethical policy covering a range of issues from the environment to animal welfare. However, Co-op Bank put itself up for sale in February, four years after it nearly collapsed and had to be bailed out by hedge funds, and there has been speculation that it may have to be broken up. So Triodos is likely to pick up at least a few Co-op Bank leavers. Nevertheless, the Co-op is still very much open to new customers: it is offering £110 to people who move to its no-monthly-fee current account via the industry’s switching service. So how does Triodos justify that £3 monthly fee? Huw Davies, its head of retail banking, says it believes it is fairer that everyone should pay a “modest” monthly charge to cover the cost of providing a banking service. “There is no such thing as free banking because someone else always pays. ‘Free’ accounts are usually subsidised with high penalty charges and hidden fees, so the most vulnerable customers, or those making a rare miscalculation with the household finances, end up paying an exorbitant price.” Some people may feel uneasy about signing up with a bank headquartered in the Netherlands when Britain is poised to leave the EU. While most banks offering products to consumers have a UK banking licence and £85,000 Financial Services Compensation Scheme (FSCS) protection, European banks are allowed to operate here under their home country’s regulations in a system known as passporting. This means that consumers banking with a such a bank are covered by its home country’s compensation scheme and not the UK’s. Triodos Bank in the UK is part of Triodos Bank NV, based in the Netherlands. That means it is covered by the Dutch deposit-guarantee scheme, which guarantees up to €100,000 (£84,450) per person. For joint accounts held in the names of two people it is €200,000. As an extra safeguard, if a credit balance is directly related to a house purchase or sale, the maximum guaranteed is €500,000. This applies for three months after the money is paid into the account. Data provider Moneyfacts has previously said that while consumers can be reassured that under European law, money held with European banks is covered by the compensation scheme of the bank’s home country, “they should bear in mind that in the event of a crisis they face language and exchange rate issues”. Incidentally, Triodos says: “We are absolutely committed to remaining in the UK.” Sally Murrall-Smith is one of those planning to sign up for Triodos’s current account. The 38-year-old who lives in Totnes, Devon, says she has always been interested in the environment. She has been a NatWest customer for decades but intends to jump ship as soon as she is able. “I want my money to be used to drive positive change,” says Murrall-Smith, who is the mother of two boys aged three and one. “Triodos funds infrastructure projects such as renewable energy and low-carbon social housing, which I see as paramount. Moreover, I love the fact it’s so transparent – I can easily find out where my money is going.” Murrall-Smith works for Totnes Renewable Energy Society (Tresoc), a member-owned community organisation, and first came across Triodos two years ago when she invested in a bond issue to finance a hydropower scheme on the Totnes weir. This was developed by a company called Dart Renewables and financed through the bank. “I was thrilled to be able to invest in such a fantastic renewable energy project on my doorstep, a project that made social, economic and environmental sense,” she says. Shortly after that she got a job with Tresoc, which is developing a community-owned hydro power plant in nearby Staverton. She likes the fact that Triodos supports organisations looking to develop local green energy supplies, enabling them to raise capital and finance projects that ordinarily wouldn’t get built. Murrall-Smith says that in the past she could have done more to find a bank suited to her values, but that banks haven’t been transparent.
Doust P.,Royal Bank of Scotland
Journal of Computational Finance | Year: 2012
The Hagan et al SABR implied volatility approximation formula can result in a negative probability density function when applied to long-dated options. This paper presents a methodology for avoiding that problem for0 < β < 1by writing the density function as the sum of two components that are always positive. One component corresponds to the absorbing boundary at F = 0, which can be a significant part of the density function for long-dated options. An upper bound on the time to expiry for the Hagan et al formula is also derived, which shows that their formula cannot be expected to work as this upper bound is approached. © 2012, Incisive Media Ltd. All Rights Reserved.