High-street banks in ‘red’ warning category over green policies

Some of the UK’s biggest high-street banks have been put in a “red” warning category based on their fossil fuel investments and policies on tackling climate change.

Consumer group Which? examined the environmental policies of 13 of the UK’s leading current account providers, and only three qualified for the Which? Eco Provider badge.

Banks can finance the fossil fuel industry through project finance (lending to fossil fuel companies for specific projects), general corporate lending, or through capital markets activity such as underwriting.

In the analysis, the researchers also considered transparency levels, whether banks had credible targets to reduce their exposure to environmentally damaging sectors, and whether they publish independently verified data.

JP Morgan Chase, Santander, Barclays, HSBC, NatWest (including RBS) and Lloyds (including Halifax and Bank of Scotland) were classified in the “red” category.

Those in the “green” category — with no exposure to fossil fuels in their banking activities — were Nationwide, The Co-operative Bank and Triodos Bank UK.

“Consumers seeking to make more sustainable choices might want to consider switching banks if they are uncomfortable with their money being invested in the fossil fuel industry and other projects which could be damaging to the environment,” said Sam Richardson, deputy editor of Which? Money.

“By choosing one of Which?’s three Eco Providers, customers can feel confident that their bank has impressive green credentials and steers clear of investing money in coal, oil or gas.”

Banks ‘too slow’ to pass on higher interest rates to savers

Banks and building societies in the UK are “taking too long” to apply rising interest rates to savings accounts, according to the chancellor.

Speaking in the House of Commons, Jeremy Hunt said that the banks’ response to higher rates was particularly slow with instant access accounts. “The rates are more frequently being passed on to people who have fixed notice accounts,” he explained.

Hunt added that he had raised the issue in “no uncertain terms” with banks last week.

Labour’s Dame Angela Eagle, who served as a Treasury minister under Gordon Brown, called on the banks to stop “profiteering”.

She claimed that banks had made more than £4bn extra profit in the latest quarter due to paying out lower interest rates while charging borrowers close to the Bank of England base rate, Sky News reports.

According to Moneyfacts figures quoted by BBC News, the gap between average mortgage and savings rates is currently wider than it was in December 2021, when the Bank of England first starting increasing interest rates in an effort to tackle high inflation.

At that time, average pricing for a two-year fixed-rate mortgage deal was 2.38% and the average easy access savings rate (the most common type of savings account) was 0.19%, a gap of 2.19 percentage points.

On Monday, the average two-year mortgage deal had climbed to 6.23% and the savings rate was 2.36%, a gap of 3.87 points. However, the gap was even higher in December 2022, at 4.24 points.

UK banks must reimburse APP fraud victims

More victims of online bank fraud will get their money back under new rules announced by the Payment Systems Regulator (PSR).

Banks and payment companies in the UK will be expected to reimburse victims of Authorised Push Payment (APP) scams within five business days and there will be additional protections for vulnerable customers.

APP fraud happens someone is tricked into making a payment, often due to criminals posing as a legitimate organisation.

There will be new rules in Faster Payments — the payment system across which the vast majority of APP fraud currently takes place — to help tackle fraud.

All payment firms will be incentivised to take action, with sending and receiving firms sharing the costs of reimbursement 50:50.

Banks will be given guidance on implementing mandatory reimbursement, for example regarding the ability to apply a claim excess and maximum level of reimbursement.

The new requirement will not apply to civil disputes, payments which take place across other payment systems or international payments.

“Once implemented, our changes will deliver a major shift from the status quo, giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place,” said Chris Hemsley, managing director of the PSR. “That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.”

Age UK calls for more shared banking hubs

A charity has highlighted the need for shared banking hubs to be rolled out across the UK to support people who are not comfortable managing their finances online.

Designed to offer counter services for several banks in one place, shared banking hubs can be a lifeline in communities where local banks have closed their high street branches. They provide basic banking services including counter services run by the major banks and the Post Office, as well as dedicated rooms where customers can see staff from their own bank to discuss more complex issues.

Older people are among those who can struggle to access banking services when banks close down locally, Age UK pointed out.

New research conducted by Ipsos for Age UK shows that four in 10 over-65s with a bank account in Britain (39%) — equivalent to 4.09 million people — are not managing their money online and could be at high risk of financial exclusion.

Nearly a third of older people with a bank account (31%) — equivalent to 3.25 million people — said they feel uncomfortable with online banking. Their concerns included not wanting to be defrauded or scammed (31%), a lack of trust in online banking services (28%) and a lack of IT skills (28%).

In particular, those who are aged 85+, female, on a low income or more disadvantaged than their counterparts were more likely to feel uncomfortable using online banking.

And three in four account-holders aged 65+ (75%) — equivalent to 7.86 million people — said they want to carry out at least one banking task in person at a bank branch, building society or Post Office.

More than 50 new shared banking hubs are currently planned, but so far only four have opened — in Brixham, Devon; Cambuslang, South Lanarkshire; Cottingham, East Riding of Yorkshire; and Rochford, Essex. Meanwhile, an average of 54 UK bank branches have closed down each month since January 2015, BBC News reports.

“We need to face up to the fact that huge numbers of older people, the ‘oldest old’ especially, are not banking online,” said Caroline Abrahams, charity director at Age UK. “In addition, our new research also shows that even older people who do bank online often want the ability to talk to a bank employee in the flesh about some kind of transaction.

“These findings therefore demonstrate the huge and continuing demand for face to face banking services among our older population, and it’s crucial that the banks respond. Otherwise they are effectively disenfranchising millions who are willing and able to manage their finances — just not online.”

New banking hubs announced to provide access to counter services

More shared “banking hubs” have been announced for 13 communities across the UK that have been hit by branch and ATM closures.

It comes after trial hubs — run by the Post Office and shared by the major banks — opened in Rochford in Essex and in Cambuslang, on the outskirts of Glasgow.

Operating in a similar way to a standard bank branch, the service allows customers of almost any bank to withdraw and deposit cash, make bill payments and carry out regular transactions. Customers can also see staff from their own bank on different days of the week.

The hubs are aimed at “providing vital cash and banking services where they are needed most”, said ATM network Link and the Cash Action Group, which includes banking industry representatives and others.

Of the first wave of 12 hubs, only the first two are in currently operation but the other 10 are expected to open over the next few months.

The 13 new hubs announced on Tuesday take the total number planned to 25.

Locations are set to include Brechin in Angus, Forres in Moray, Carluke in Lanarkshire, Kirkcudbright in Dumfries and Galloway, Axminster in Devon, Barton-upon-Humber in Lincolnshire, Lutterworth in Leicestershire, Royal Wootton Bassett in Wiltshire, Cheadle in Staffordshire, Belper in Derbyshire, Maryport in Cumbria and Hornsea in Yorkshire.

Additionally, the first banking hub under the scheme in Northern Ireland will open in Kilkeel in Newry.

Natalie Ceeney, chair of the Cash Action Group, said: “Cash still matters hugely to millions of people across the UK and with the cost-of-living crisis biting, more and more people are turning to cash as a way of budgeting effectively. Banking hubs are an important part of the solution.”

UK banks no longer ‘too big to fail’, says BoE

The UK’s top banks are no longer “too big to fail” in any future crisis, according to the Bank of England.

A new assessment by the central bank considered whether eight major banks had taken sufficient steps to ensure they are resilient and would not require taxpayers to bail them out, as happened in the 2007-08 financial crisis.

The BoE said it was satisfied that even if a major bank were to fail, it could remain open and customers would be able to keep accessing their accounts and business services as normal.

“We now have a robust resolution regime and following major UK banks’ work in preparing for resolution, there are now more choices if a bank experiences serious problems,” the report explained.

Shareholders and investors, not taxpayers, would be first in line to bear a bank’s losses and the costs of recapitalisation.

The assessment looked at Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest, Santander UK, Standard Chartered and Virgin Money UK and their preparations for resolution under the Resolvability Assessment Framework.

“The Resolvability Assessment Framework is a core part of the UK’s response to the global financial crisis, and demonstrates how the UK has overcome the problem of ‘too big to fail’,” said Dave Ramsden, deputy governor for Markets and Banking at the Bank of England.

“The UK authorities have developed a resolution regime that successfully reduces risks to depositors and the financial system and better protects the UK’s public funds.”

Ramsden added: “Safely resolving a large bank will always be a complex challenge so it’s important that both we and the major banks continue to prioritise work on this issue.”

Banks accused of charging retailers ‘excessive’ card fees

Retailers are calling for action over what they say are “excessive” fees charged by credit and debit card providers in the UK.

Card use rose steadily from 54% of transactions in 2016 to 61% in 2019 and Covid-19 has accelerated this trend as more customers shopped online or paid by card in store, the British Retail Consortium (BRC) said.

Meanwhile, the cost to retailers of accepting payments reached £1.1bn in 2019, of which £950m was from card payments. Shops are charged an average of 18.4p per credit card transaction (up 15% from 2016), and 5.9p for every debit card transaction (up 6% from 2016). On top of this, businesses have received notices in the past year of new fees that will be charged to accept payments online.

These increasing fees are putting further pressure on retailers at a time when they are already facing higher costs due to coronavirus and Brexit. Ultimately these costs, equivalent to £40 per household, will be reflected in consumer prices, the BRC said.

The trade body has joined forces with the British Independent Retailers Association, Association of Convenience Stores, Federation of Small Businesses and UKHospitality to call for “decisive action” to tackle increasing card fees.

“With card payments accounting for almost 80% of retail sales, it is vital that the Government takes action to tackle excessive card costs,” said Andrew Cregan, head of Finance Policy at the BRC. “Without action we will see businesses put under further pressure and it will be consumers who are forced to pay the price.”

James Lowman, chief executive of the Association of Convenience Stores, added: “The way that customers pay in convenience stores is continuing to diversify and the costs that must be met by retailers to provide these options are rising. Recent years have seen the financing of ATMs undermined, causing many machines to become fee-charging regardless of retailer preferences, and some parts of card fees double for retailers.

“There are two priorities for retailers here: everyone would benefit from a restored national network supplying access to cash, and action is needed to allow retailers to effectively find the best deal and switch card payments providers.”

Bank of England asks banks if they are ready for negative rates

The Bank of England has contacted UK banks to ask them how ready they would be if the base rate was cut to zero or turned negative.

Although the Bank has no current plans to make such a move, Deputy Governor Sam Woods said that officials need to know whether there were any technological or operational challenges involved.

The Bank of England cut interest rates to the current historic low of 0.1% at the start of the Covid-19 crisis. Some central banks, including the European Central Bank, have already implemented negative interest rates as a monetary policy tool.

“For a negative Bank Rate to be effective as a policy tool, the financial sector — as the key transmission mechanism of monetary policy — would need to be operationally ready to implement it in a way that does not adversely affect the safety and soundness of firms,” Woods wrote.

The letter asks bank CEOs to provide “specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration — and the steps that you would need to take to prepare for the implementation of these”.

“We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes,” Woods added.

In a recent Citizen’s Panel open forum held by the Bank of England, Governor Andrew Bailey said the pandemic meant that negative rates should be considered as part of its “tool kit”, the Guardian reports.

Covid-19 ‘bounce back’ loans could cost UK taxpayers £26bn

Up to 60% of borrowers may default on business loans provided through the UK Government’s Bounce Back Loan Scheme, the National Audit Office (NAO) has warned.

A new report by the spending watchdog says that the scheme “succeeded in quickly supporting small businesses” but the Government faces a potential loss of £15bn to £26bn through businesses not being able to repay the loans and fraud.

The Bounce Back Loan Scheme was set up to support smaller businesses during the Covid-19 pandemic. Loans are delivered through commercial lenders and small and medium-sized firms can borrow between £2,000 and up to 25% of their turnover, with a maximum loan of £50,000 available.

Demand has been greater than anticipated, with the total value of loans provided through the scheme now predicted to be £38bn to £48bn, up from an initial estimate of £18bn to £26bn.

However, the Bounce Back Loan Scheme has less strict eligibility criteria than other Covid-19 related business loan schemes, relying on businesses self-certifying application details with limited verification and no credit checks performed by lenders for existing customers.

This lower level of checks presents credit risks as it increases the likelihood of loans being made to businesses that will not be able to repay them, the NAO said.

What’s more, the Government’s 100% guarantee against the loans reduces lenders’ incentives to recover money from borrowers.

An earlier third-party review commissioned by the British Business Bank found that, while some risks can be mitigated, there remains a “very high” level of fraud risk, caused by self-certification, multiple applications, lack of legitimate business, impersonation and organised crime.

The full extent of losses, both credit and fraud, will emerge when the loans are due to start being repaid from 4 May 2021.

The NAO called for the Government to implement a thorough debt-recovery process with lenders and consider how it might better prevent fraud in any similar schemes in the future.

Co-op Bank to close 18 branches

The Co-operative Bank has announced plans to cut around 350 jobs and close 18 branches across the country.

The high street bank said that the move was necessary due to the current economic uncertainty and the shift to online banking.

As well as jobs lost due to the branch closures, the cuts include middle management and head office roles.

The bank said that, where possible, it would look to redeploy colleagues into alternative posts.

Expressing regret over the news, Co-operative Bank chief executive Andrew Bester said: “Unfortunately, we’re not immune to the impact of recent events, with the historically low base rate affecting the income of all banks and a period of prolonged economic uncertainty ahead, which means it’s important we reduce costs and have the right-sized operating model in place for the future.

“At the same time, we are responding to the continuing shift of more and more customers choosing to bank online, with lower levels of transactions in branches, a trend which has been increasing for some time, across the banking sector and more broadly.”

Bester added that the bank is in a “resilient position” after making progress in recent years, and its focus is on maintaining this and supporting customers through the crisis.

The branches set for closure are those in Ashton, Bradford, Cambridge, Chatham, Chester, Chichester, City of London, Dartford, Halesowen, Harrogate, Luton, Oxford, Rotherham, Solihull, Truro, Wakefield, Walsall and York.