Many people love to hate banks. Whether it’s anger over being charged endless fees or simply frustration after being denied a loan, customers have a laundry list of complaints against their financial institutions. (Fortunately there are several avenues besides banks for consumer loans but many people turn to their banks first.)
And consumer dissatisfaction is just the tip of the iceberg for banks, which have other, larger problems that aren’t going away any time soon. Ask most people what caused the big financial crash of 2008 and they’ll point their fingers at the big banks. Even the Governor of the Bank of England launched a stinging attack back in October of 2014 against the bankers who created the financial crisis and “got away with their compensation packages and without sanction”.
Others, such as former banking insider turned author Adair Turner, contend that a deeper systemic malaise caused the problem and that bankers were largely “irrelevant” to the crisis. Turner claimed that lending excessive amounts on mortgages, to people who would likely default on their mortgages, was the true root of the problem. A rather strange defense, given that it was the bankers who approved most of those “excessive” loans, but pretty much what one would expect a career insider to say.
Apologists aside, there’s no doubt that the banks played a big part in the worldwide economic meltdown, and many policymakers – at least those who aren’t somehow beholden to the banks – aren’t willing to let this fact be forgotten any time soon.
Are banks still being given too much leverage?
Indeed, some of the reforms enacted in the UK during recovery from the financial crisis would seem to indicate that we had learnt from our mistakes. Lenders tightened their rules to make it more difficult for borrowers to get into trouble, and legislation was passed to make banks more accountable, at least to regulators if not necessarily to consumers. Yet in early February 2016, Chancellor George Osborne reversed controversial “guilty until proven innocent” rules for top bank bosses, causing Labour to accuse him of “doing the bankers’ bidding”.
With his reversal, Mr. Osborne replaced the “burden of proof” rules that forced bankers to prove that they had engaged in no wrongdoing with a duty of responsibility rule, wherein regulators had to prove improper lending practices, rather than placing the responsibility for establishing regulatory compliance on the bankers who were granting the loans. Not to cast any aspersions upon Mr. Osborne’s integrity, but eliminating the “presumption of [senior bankers’] responsibility” would seem to invite public speculation as to whom the Chancellor and government are most loyal, those whom the government is supposed to represent, or those whom it is the government’s responsibility to keep in line.
I can’t get no satisfaction…
As the battle of banks versus government rages on, with no clear outcome in sight, the banks still have to wage war on the consumer front as well. A report issued by Banking Technology in July 2015 indicated that UK banks ranked bottom in a nine-country customer satisfaction survey commissioned by technology vendor FIS.
According to the survey, bank customers gave good marks to the banks’ use of technology to provide convenience, but only 25 percent of respondents felt that banks did an acceptable job of providing more basic areas, such as transparency and fairness in the application of fees and charges. Since it is primarily the younger, digitally-acclimated customers who value the enhanced accessibility offered by developing technologies, it would not be surprising for some customers, particularly those in older age groups, to feel that their more traditional expectations are being given short shrift.
Even if banks aren’t always the “bad guys”, banks in the UK have much room for improvement. As additional alternatives to traditional banking spring up, the banks are going to have to fight harder to retain customers, even among the more digital-savvy demographics. It is only a matter of time before even those customers who were initially drawn to the convenience features the banks offered will begin demanding the same kinds of transparency and fairness as their older counterparts.
Consumers may not be able to mitigate government’s seeming favouritism towards the banks, but they do have some clout nevertheless. If they are being ill-treated by a bank, they can exercise that clout by shopping around for a lender or a financial institution that will treat them with the level of respect they want and deserve.
And consumer dissatisfaction is just the tip of the iceberg for banks, which have other, larger problems that aren’t going away any time soon. Ask most people what caused the big financial crash of 2008 and they’ll point their fingers at the big banks. Even the Governor of the Bank of England launched a stinging attack back in October of 2014 against the bankers who created the financial crisis and “got away with their compensation packages and without sanction”.
Others, such as former banking insider turned author Adair Turner, contend that a deeper systemic malaise caused the problem and that bankers were largely “irrelevant” to the crisis. Turner claimed that lending excessive amounts on mortgages, to people who would likely default on their mortgages, was the true root of the problem. A rather strange defense, given that it was the bankers who approved most of those “excessive” loans, but pretty much what one would expect a career insider to say.
Apologists aside, there’s no doubt that the banks played a big part in the worldwide economic meltdown, and many policymakers – at least those who aren’t somehow beholden to the banks – aren’t willing to let this fact be forgotten any time soon.
Are banks still being given too much leverage?
Indeed, some of the reforms enacted in the UK during recovery from the financial crisis would seem to indicate that we had learnt from our mistakes. Lenders tightened their rules to make it more difficult for borrowers to get into trouble, and legislation was passed to make banks more accountable, at least to regulators if not necessarily to consumers. Yet in early February 2016, Chancellor George Osborne reversed controversial “guilty until proven innocent” rules for top bank bosses, causing Labour to accuse him of “doing the bankers’ bidding”.
With his reversal, Mr. Osborne replaced the “burden of proof” rules that forced bankers to prove that they had engaged in no wrongdoing with a duty of responsibility rule, wherein regulators had to prove improper lending practices, rather than placing the responsibility for establishing regulatory compliance on the bankers who were granting the loans. Not to cast any aspersions upon Mr. Osborne’s integrity, but eliminating the “presumption of [senior bankers’] responsibility” would seem to invite public speculation as to whom the Chancellor and government are most loyal, those whom the government is supposed to represent, or those whom it is the government’s responsibility to keep in line.
I can’t get no satisfaction…
As the battle of banks versus government rages on, with no clear outcome in sight, the banks still have to wage war on the consumer front as well. A report issued by Banking Technology in July 2015 indicated that UK banks ranked bottom in a nine-country customer satisfaction survey commissioned by technology vendor FIS.
According to the survey, bank customers gave good marks to the banks’ use of technology to provide convenience, but only 25 percent of respondents felt that banks did an acceptable job of providing more basic areas, such as transparency and fairness in the application of fees and charges. Since it is primarily the younger, digitally-acclimated customers who value the enhanced accessibility offered by developing technologies, it would not be surprising for some customers, particularly those in older age groups, to feel that their more traditional expectations are being given short shrift.
Even if banks aren’t always the “bad guys”, banks in the UK have much room for improvement. As additional alternatives to traditional banking spring up, the banks are going to have to fight harder to retain customers, even among the more digital-savvy demographics. It is only a matter of time before even those customers who were initially drawn to the convenience features the banks offered will begin demanding the same kinds of transparency and fairness as their older counterparts.
Consumers may not be able to mitigate government’s seeming favouritism towards the banks, but they do have some clout nevertheless. If they are being ill-treated by a bank, they can exercise that clout by shopping around for a lender or a financial institution that will treat them with the level of respect they want and deserve.
