Queen Pledges To Sort Out Banks
Monday 1 December 2008
The queen in her speech has stated that customers of banks, (everyone) are to be given new legal rights, and that banks are going to be made to adhere to a new code of conduct. This has all come about as a result of the banks’ behaviour in the face of the credit crisis.
This code will make sure that customers are briefed by the banks in relation to the best products that are available to them. The banks will also be stopped from abruptly withdraw credit or alter the terms of credit agreements without having a valid reason. All of this positive action is to be regulated by the Financial Services Authority. (FSA)
Government ministers have felt it a matter of urgency as banks have been treating their customers and especially small businesses unfairly, across the board. It very much seems as though it is a case of biting the hand that feeds; the government bailed the banks out and they have ignored the opportunity to pass on their good fortune to their customers.
Financial institutions have been upping fees and changes for their small business customers, making it neigh on impossible for them to survive in an economic downturn. These are the type of customers that needed to be benefiting the most from a cut in interest rates.
The code is not going to be so militant as to fore banks to cut their interest rates to the extent that the Bank of England has cut its base rate, but the banks will be made to uniform their customers about better products and services that they are entitled to.
The banks are being given somewhat of a reprieve in view of the fact that if they carry on with such underhanded practice then the next step will be for the government to introduce a maximum interest margin that banks are allowed to charge in relation to specific products.
As it stands the banks are all privy to a voluntary code of conduct, but Lord Mandelson has drawn attention to the fact that individual bank managers are ignoring this and taking the law into their own hands.
This new code of conduct is set to be the backbone of the new ‘banking reform bill’ and it is set to be announced in the Queen’s Speech. The bill is also thought to be geared towards the quickening of compensation being paid to savers in failed banks.
Something that is extremely alarming in view of the current economic situation is that banks have been cancelling the overdraft, loans, and credit card facilities of the customers that cannot survive without such services.
Something that the new code aims to address is the plight of customers who are staring the repossession of their homes in the face. Alistair darling is of the opinion that banks should be forced to wait at least three months before they start repossession proceedings on a person’s home
The government have been nothing short of shocked and appalled at the fact that banks have refused to increase lending levels to small businesses, thus putting many of them into serious financial difficulty. This is the case after the government spent £37 billion for stakes in various banks, in an attempt to improve their financial position.
What is seemingly the case though, is that the banks are underhandedly storing the money that they have been given, and speeding up the payment of outstanding loans, so that the can quickly repay government investment.
Alistair Darling has stated that it may well be a case of putting more money into the economy, in order for Britain to be able to cope with the recession crisis.