Banks Make A Mockery Of Their Self-regulatory #LendingCode

Readers may still be surprised to hear that Britain's retail banks remain self-regulated when it comes to their lending activities.

That means it's the job of their own Lending Standards Board to check that subscribers are complying with the self-regulatory Lending Code, not the Financial Conduct Authority (although there is a 'memorandum of understanding' between the two bodies written on the back of an envelope somewhere).

Of course, the Lending Standards Board tends to give its own members a clean bill of health...

Which is puzzling, because the LSB has just made the rather unfortunate discovery after reviewing complaints procedures that there is "mixed evidence to indicate that issues, once identified, [are] being reviewed specifically against the requirements of the Code."

In other words, the banks are blowing raspberries at the Code.

So, um, how could the LSB have given the banks a clean bill of health before now?

Does the FCA care? Or, in regulatory speak, "Quis custodiet ipsos custodes?"

It's been a farce from the very beginning.

2015: The Year Our Political Class Went Rogue

April passed in stunned silence on this blog because I was waiting patiently for the UK General Election to get real.

Instead, our political classes went rogue.

Today, all the way from Greece to Scotland, there are no politicians who believe it is their job to ensure that society lives within its own means.

James Palumbo hit the nail on the head in his article for the Evening Standard this week. "In place of facing hard truths, our leaders offer unaffordable and undeliverable promises." The Institute of Fiscal Studies promptly confirmed it.

You might think our politicians went rogue years ago, and some of them did. But I think the last coalition was formed by people in such a deep state of shock at how badly the New Labour machine had transformed Britain's economic plight that they were genuinely committed to ensuring the country did not go broke. 

Since then, the endless process of distraction, deception and spin has meant that even the dreaded Tory machine has realised it can 'extend and pretend' just like the Greeks. 

These days nothing in politics is real. The same effluent is cycled from the pollsters to the media to the party machines, out the mouths of candidates and canvassers and into the eyes and ears of the deceived, who feed the same crap back into the polls. Every 'issue' - from health, social welfare and education to immigration, foreign aid, devolution and higher taxes for 'non-doms', 'mansions' and foreign corporations - is debated on the utterly false assumption that the country can finance whatever policy is touted.

If you thought Gordon Brown has had a rough ride, just imagine what will happen to the Prime Minister in charge when the truth really dawns.

Is There Really A Single EU Market?

Some sobering figures from the European Commission for single market fantasists enthusiasts (as if Greece wasn't sobering enough).

EU cross-border services account for 4% of all online services, as opposed to national services within the US (57%) and in each of the EU member states (39%). 

15% of EU consumers bought online from other member states, compared to 44% who bought online nationally, with online content seeing double-digit growth.

Only 7% of SMEs sell online across EU borders - and it costs an average of €9,000 to adapt their processes to local law in order to do so. 

The cost/price of delivery is (obviously) cited as a major problem, as well as differing VAT arrangements. But suggested solutions seem to ignore these and other key barriers to cross-border retail that have been cited in previous market studies, such as lack of marketing strategy, preference for national brands, language barriers and local employment law challenges. Presumably, that's because the Commission can do little to address such fundamental practicalities. Instead, they want to focus on:

• stronger data protection rules;
• broadband/4G roll-out;
• use of 'Big Data' analytics; and
• better digital skills amongst citizens and e-government by default.

The sense of futility that permeates such reports by Eurocrats only emphasises the fact that the law follows commerce; it doesn't catalyse markets.  

Yet, ironically, in areas where commercial and consumer pressure to enable cross-border activity is emerging, such as crowdfunding and crypto-technology, we find European institutions taking an unduly restrictive approach.

When will they simply get out of the way?

Who Is Late In Paying Our #SMEs £41bn?!

In an attempt to eradicate late payments to small businesses of approximately £41bn, the government has proposed that, from April 2016, large listed companies will have to report twice-yearly on: 

• their standard payment terms;
• average time taken to pay; 
• the proportion of invoices paid within 30 days, 31-60 days and beyond agreed terms; 
• amount of late payment interest owed/paid; 
• incentives charged to join/remain on preferred supplier lists; 
• dispute resolution processes; 
• the availability of e-invoicing, supply chain finance and preferred supplier lists; and 
• membership of a Payment Code.

A copy of the simple but effective sample report is attached to the government's announcement.

Not only should this data result in the naming and shaming of late payers, but it should also further define and foster growth in the market for discounting these invoices, to help fund the growth of the affected SMEs.

8 Financial Services Policy Requests - Election Edition

If you've been lumped with the job of writing your party's General Election Manifesto, here are 8 financial policies to simply drag and drop:

1. Remove the need for FCA credit-broking authorisation just to introduce borrowers whose finance arrangements will be 'exempt agreements' anyway - it makes no sense at all;

2. Remove the need for businesses who lend to consumers or small businesses on peer-to-peer lending platforms to be authorised by the FCA - again, it makes no sense, because the platform operator already has the responsibility to ensure the borrower gets the right documentation and so on; an alternative would be to allow such lenders to go through a quick and simple registration process;

3. Remove the requirement for individuals who wish to invest on crowd-investment platforms to certify that they are only investing 10% of their 'net investible portfolio' and to either pass an 'appropriateness test' or are receiving advice - it's a disproportionately complex series of hoops compared to the simplicity of the investment opportunities and the typical amounts at stake;

4. Focus on the issues raised in this submission to the Competition and Markets Authority on competition in retail banking, particularly around encouraging a more diverse range of financial business models;

5. Re-classify P2P loans as a standard pension product, rather than a non-standard product - the administrative burden related to non-standard products is disproportionately high for such a simple instrument as a loan;

6.  Reduce the processing time for EIS/SEIS approvals to 2 to 3 weeks, rather than months - investors won't wait forever;

7.  Reduce the approval time for FCA authorisation for FinTech businesses from 6 months to 6 weeks; alternatively, introduce a 'small firms registration' option with a process for moving to full authorisation over time, so that firms can begin trading within 6 weeks of application, rather than having to spend 3 months fully documenting their business plans, only to then wait 6 to 12 months before being able to trade - others entrepreneurs and investors will stop entering this space;

8. Proportionately regulate invoice discounting to confirm the basis on which multiple ordinary retail investors can fund the discounting of a single invoice - it's a rapidly growing source of SME funding, simple for investors to understand and their money is only at risk for short periods of time.