Mis-selling, Manipulation & mis-management

Who’s in control of the banks? In a week where Royal Bank of Scotland’s NatWest software ‘glitch’ brought chaos to personal and business banking while Barclays Bank are fined for ‘fixing’ inter-bank lending rates, faith in the UK banking system plummets to yet another low.

When the Bank of England governor criticises the banking system as providing “shoddy” service to it’s customers, it’s time for people to start asking serious questions.

Two questions arise from this week’s chaos:

  • What is the government doing?
  • How safe is my money?
  • How honest is my bank?

What is the government doing?

After being so outspoken about the morality of tax avoidance, David Cameron is conspicuous by his avoidance of the problem yet again when something touches the heart of Conservative politics… capitalism!

Possibly grateful for the deflection from his benefits debate; in response to the Barclays ‘crimes’, Cameron suggests “The whole management team [at Barclays] have got some serious questions to answer. Let them answer those questions first”. What questions are those? Or does he mean they need more time to consider their defence and excuses?

The FSA have stated that there was “serious and widespread” misconduct. This happened between 2005 and 2009 and while the fines have only just been announced, it’s claimed that Barclays’ Investment Banking compliance function were aware over four years ago. Surely, that’s plenty of time to consider the implications of an ongoing investigation and have the answers ready.

On the subject of NatWest’s software problems and the potential £100 million costs to a business primarily owned by the tax payer there is a deafening silence. Perhaps the problem is the damage it’s doing to the sale price of RBS? Least said, soonest mended?

How safe is my money?

Besides the devious methods of banks to ensure profit, one of the greatest threats to modern business is a cyber-attack. If banks can manipulate systems or botch upgrades, how safe is banking technology?

With mainstream software requiring regular security patches and upgrades combined with the outdated ‘home-grown’ systems, how vulnerable is banking software. The truth is that nobody probably knows and those with any doubts are unlikely to tell.

The world of technology security is reactive. Developers allow for what they imagine can happen and when someone finds a new flaw they patch it up, sometimes creating further problems.

Competitive banking allows for independent software systems and with the best will in the world no-one can create perfect security. The cyber bank robbers are out there!

The good news is that banks wouldn’t want you to know the truth so it’s unlikely that if they ‘lost’ any of your money that you’d ever know about it.

How honest is my bank?

How can individual traders/bankers be able to short circuit systems as fundamental as LIBOR and EURIBOR? And, what else can they do with or without the knowledge (approval?) of senior managers?

Is it temptation, opportunity, pressure or just plain greed that motivates banks to repeatedly do their customers a disservice?

Is there an underlying dishonesty or corruption in the banking industry? When staff at all levels from customer service to traders make money through sales commissions, is it any wonder that some are vulnerable to deceit or dishonesty?

All the time, it’s the customer that suffers. Where will Barclays get the money to pay their fines? How will RBS cover the costs of it’s software failure? Answer: Through it’s customers. Charges, interest and possibly even more mis-selling will be required to make up the difference.