Reckless bankers may be jailed

Chancellor George Osborne has pledged to implement criminal penalties for reckless bankers and tighter control for bonuses as he set out the Government's response to a landmark Parliamentary commission.

But he rejected a recommendation for the abolition of UK Financial Investments (UKFI), the body that handles the state's holdings in the Royal Bank of Scotland and Lloyds Banking Group.%VIRTUAL-SkimlinksPromo%

Its role came into focus when RBS chief executive Stephen Hester quit last month amid speculation that he had been forced out by the Treasury, which through UKFI owns 81% of the bank.

In a statement, the Government set out key proposals from the commission to be added to the banking reform Bill in the autumn. These are to include a new offence of "reckless misconduct" for senior bankers, with those found guilty facing a possible jail sentence.

Mr Osborne also backed moves to allow bonuses to be deferred for up to 10 years and enable 100% "claw back" of bonuses where banks are propped up by the state.

Further measures, designed to improve competition, will include asking the new payments regulator to look into making it easier to switch between accounts, and beefing up the role of the new Prudential Regulation authority.

Labour has accused the Government of ducking radical reforms and is demanding that ministers explain how it will protect taxpayers' interests when the state-owned stakes in Lloyds and Royal Bank of Scotland are sold off.

The commission, chaired by Conservative MP Andrew Tyrie, was set up by the Chancellor in the wake of the financial crisis and the Libor rate-rigging scandal. Members included former Tory chancellor Lord Lawson and the Archbishop of Canterbury, Justin Welby.

Mr Osborne said the main recommendations of its report, published last month, were being delivered. He said cultural reform was necessary in banking "to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth". He added: "The Government is determined to raise standards across the banking industry to create a stronger and safer banking system."

Business Secretary Vince Cable said: "If we're to get our economy back on track, we need to get the banking system back on track first. Creating new powers to jail bankers who are reckless with other people's money and getting more competition into banking, is a start."

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Reckless bankers may be jailed

More than 46,000 of 106,000 the complaints received by the FOS in the second half of last year related to payment protection insurance (PPI). And the organisation is expecting to receive a record 165,000 PPI complaints in 2012/2013.

The huge numbers are due to the PPI mis-selling scandal that should now be a thing of the past, but there is no doubt that the insurance, which can add thousands to the cost of a loan, is highly unpopular!

(Pictured: Martin Lewis after the PPI payout ruling)

Complaints about mortgages jumped by 38% in the last six months of last year, the FOS figures show, compared to an increase of just 5% in investment-related complaints.

Common gripes about mortgages include the exit penalties imposed should you want to sell up or change you mortgage before a fixed or discounted deal comes to an end, and the high arrangement fees charged by many lenders.

While there is nothing in the data released by the FOS about the number of complaints relating to savings accounts, hard-pressed savers have been struggling with low interest rates for several years now.

You can get up to 3.10% with Santander's easy-access eSaver account, but many older accounts are paying 1.00% or less and even this market-leading offer includes a 12-month bonus of 2.60% - meaning that the rate will plummet to just 0.50% after the first year.

Banks are imposing the highest authorised overdraft interest rates since records began, with today's borrowers paying an average of 19.47%, according to the Bank of England.

A typical Briton with an overdraft of £1,000 is therefore forking out around £200 in interest charges alone. Coupled with meagre returns on savings, it's enough to make your blood boil!

While authorised overdrafts may seem expensive, going into the red without permission will cost you even more due to huge penalty fees.

Barclays, for example, charges £8 (up to a maximum of £40 a day) each time that there is not enough money in your account to cover a payment.

If you need to send money abroad, the likelihood is that your bank will impose transfer charges - and offer you a poor rate of exchange. Someone transferring a five-figure sum could easily lose out by £500 or more as a result.

The good news, however, is that you can often get a better deal by using a currency specialist such as Moneycorp.

Automated telephone banking systems, not to mention call centres in far-flung parts of the world, are one of our top gripes - especially as we often encounter them when we are already calling to report a problem.

In the words of one disgruntled customer: "What is it about telephone banking that turns me into Victor Meldrew? Well, maybe it's the fourteen security questions, maybe it's the range of products that they try to push or maybe it's because I'm forced to listen to jazz funk at full volume while my phone bill soars.

"Actually though, I think it's because the people I eventually speak to rarely seem able to solve the issue I'm calling about."

The days of a personal relationship with your bank manager are long gone - for the huge majority of us at least.

When ethical Triodos Bank investigated recently why around 9 million Britons would not recommend their banks to a friend or relative, it found that almost a third felt they were not treated as individuals. Another 40%, meanwhile, were simply disappointed with the customer service they received.

When you're in a rush, the last thing you want to do is wait in a long queue at your local branch.

Researchers at consumer champion Which? recently found that most people get seen within 12 minutes, but you could have a much longer wait if you go in at a busy time. Frustrating stuff!

The Triodos Bank research also indicated that the bonus culture that ensured the bank's high-flying employees received large salaries, even when it was making a loss at the taxpayer's expense, was hugely unpopular with consumers.

About a quarter of those who would not recommend their current banks said this was the main reason why. And with RBS executives sharing a £785 million bonus pool despite the bank, which is 82% publicly owned, making a loss of £2 billion last year, it's not hard to see why.

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