The government can now order the banks to drop OFT case Appeal & return all charges

jclancy

Thought moneysavingexpert.com forum members might like to view and comment on a thread which Professor David Bailey of the University of Birmingham Business school and I have posted on Bank Charges on Professor Bailey's highly influential and widely read Blog (which often crosses over onto the hard copy of the paper) on the Birmingham Post Website Business Blog called: 'Memo from the Banks - "Thanks for saving us, but we will fight for the right to be unfair, and use your money to do it!"'

It's here.

It makes the point that as the taxpayers have bailed out the banks they are effectively now paying for all sides of the OFT 'test' case: all the lawyers for all 8 banks, the OFT's lawyers, the judges, the court staff, the expenses etc. Just for the banks to pursue a case that they are allowed to be unfair!

It argues that the government through UKFI (the body set up to protect the taxpayers' investments in the banks) should order the Banks and their huges teams of lawyers now effectively subsidised by the taxpayer, to drop the appeal against the High Court decision that their charges should actually be subject to the test of fairness. It also argues that the banks should similarly be ordered to return all bank charges which would involve a much needed boost of liquidity into the economy. The money to be used for bankers' bonuses can be used for the great bank charge payout.

It would be great to have forum members here also comment on this rather hard-hitting campaigning approach with a new angle on the debate.

MSE note - this poster has permission to link to the Birmingham Post blog entry.

jclancy

Obviously feel free to comment here, but it would be great also for members to comment on the Birmingham Post Blog website as well, as that will help to get the issue into the mainstream there.

John Clancy

Nathan_Spleen

Another poorly researched artcle I'm afraid.

The Government have no legal powers to ''order'' the banks to do anything. It also misleadingly claims that the government are footing the banks' legal fees for the case.

kev2b3

The Government may not have legal powers but surely they can place pressure on the banks. The Government can't just sit there and watch the banks use huge amount of tax payers money to pay off a few managers. I am just a normal man on the street with no idea about banking or politics but everytime i read articals like above i just feel the banks are just laughing at everyone, but there again if the government was to give me a few thousand pounds of tax payers money and told me not to worry others will pay it off i think i would be laughing too.

simon_templar_2

When they say 'the banks' please remember there are some banks who have not written off toxic debts and have not used any govt handouts.

jclancy

Nathan, you need a bit more research into corporate law and constitutional Law.

The shareholdings owned by the government will enable it through UKFI to pass ordinary and special resolutions in the limited companies. In the case of most of the banks, this will, in fact amount to an instruction by the bank to itself. This can be backed up by the the threat of a special resolution to remove the directors who refuse those instructions (so Natwest and Lloyds, HBOS and RBS would be in *big* trouble). Also as the government has taken preference shares, these can be amended overnight, if not already, to give them enhanced voting rights as well.

The government can issue statutory instruments overnight also to regulate the conduct of a bank.

The OFT can indeed instruct a UK business to behave in a particular manner - a fine could be imposed equal to the amount of the bank charges, if necessary, for failure to follow that instruction.

Of course the government could nationalise any bank which fails to do as instructed overnight also, leaving those shareholders who, for example, do not join with the shareholder government in an ordinary or special resolution with worthless shares.

Political will + legislation or statutory instrument = instructions which will and must be followed.

You have very little faith in democracy! Good job you don't live in United States of Obamaland, where these things are coming to be understood more rapidly than this side of the pond!

In the words of David Cameron, Nathan, "Wake up and smell the coffee".

jclancy

I'm not sure which banks, you mean, Simon Templar.

You're right that some of them (e.g. HSBC and Barclays) are going around acting as if they are standing on their own two feet without assistance from the state, but that is far from the truth.

It looks like the head of Barclays is about to ask the government to apply our money as taxpayers to the £4.5billion of bad debts they are writing down, so now Barclays are in the queue despite grovelling to Middle Eastern sovereign wealth funds to do their recapitalisation because it stuck in the craw to have to go the the UK government like the other 'failure' banks. In reality they did that to avoid government intervention in the way they run things and to enable them to pay out bonuses. No they want us to guarantee billions of their assets!

If you read to the end of the article on the Birmingham Post you will see that we make it clear that just because a bank has not been directly recapitalised in return for shares, that doesn't mean that it has not been bailed out by the UK taxpayer. All the banks are involved in the (only initial) £250billion Credit Guarantee Scheme and the Bank of England's Discount Window Facility which provided desparate liquidity to the banking sector by allowing them to swap less liquid assetss. Without these facilties backed by you and me as taxpayers, they simply would have collapsed, it's as simple as that.

Santander,by the way, would not have saved Abbey and Alliance and Leicester without government intervention and guarantees, like handing over the nationalised Bradford & Bingley savings assets, for example!

So don't be taken in by the bravura of some of the banks, who still fail to acknoweldge (and that's half the problem) that we as UK taxpayers saved all of their sorry souls.

And they now want to use our money to fight a ridiculous self-indulgent legal case to fight for the right to be unfair!

simon_templar_2

Abbey bought B&B savings book, not Santander. As for govt bailouts, Abbey does not need and will not need any as they are one of the few banks to have bucked the trend, 2008 profits up 20%.

jclancy

The reality is, though, that Santander itself bought the B&B savings book as the parent of the company acquirer at the time of the acquisition. :

http://news.icm.ac.uk/business/nationalisation-and-santander-transfer-for-bradford-bingley/662/

I'd take your point if Abbey had acquired it prior to itself being acquired.

The government didn't send all of B&B's toxic buy-to-let and mortgage express mortgage book with it, of course. Which was nice.

The transfer of the deposits was also backed by cash from HM Treasury and the Financial Services Compensation Scheme, which was also nice.

I'm prepared to accept that Abbey in the Santander family is less of a basket case and that Santander is pretty strong (although the position of the Spanish banks themselves is in a state of flux at the moment). How Abbey might have fared without that takeover is another matter, of course.

How Alliance and Leicester would have fared is also another question.

There hasn't been an equivalent government intervention in Spain as I understand it, but it seems pretty imminent, just to create a level playing field.

The issue is: without government intervention in the US, the UK and the rest of Europe, there was a clear danger that all of the banks in the UK could have failed, and all may yet still have to be fully nationalised.

As I keep saying, it doesn't take a recapitalisation directly from the UK government to mean that the UK Banks have not relied on the government (you and me) for very survival.

Perhaps Abbey should go foward alone in the legal 'test' case, while everyone else pays back the bank charges and see how their customers respond.

There will be hundreds of thousands of UK citizens and businesses who have never claimed bank charges, never knew they were entitled to them, who were deducted at least £100s of unfair, unlawful bank charges who will be in line for a nice payout. Abbey customers might react badly while they see such payouts to family members and friends from the other government-assisted or bailed-out banks.

I say its time for political action, not legal action. It can be much quicker. Could be whistling in the wind for that, I know. But the time is ripe to turn this political, not legal. The Bonuses issue needs to have the bank charges issues attached to it: both result from lazy, greedy business practices which ultimately do harm to free market capitalism.

Lobbying by you and me of politicians of all parties could bring better and swifter results than legal action.

Nathan_Spleen

Above all else I trust the judiciary.

Their is one lawyer I certainly have little faith in, and that'll be yourself.

natweststaffmember

You have said refund refund refund but have not given a model that should take over that premise. Ok, UKFI forces some banks to refund all charges, so what can they charge? When is the point in which they refund and a new charging structure is in place? Is there a timescale on refunds? Who decides what the amount is? What stops you or I not going to court to challenge that new amount, as can be done with credit card charges? Who is paying the QC's fees? Laurence Rabinowitz for example, does not work for free.
I understand you point of view, but I don't agree with you and you need to add to the article to clarify at least the questions asked above