Why aren't bankers ever jailed?

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The husband of actress Emma Thompson has said he won't pay any tax until someone is jailed over the HSBC avoidance scandal. While his announcement was on the dramatic side, it raises the question: why are bankers never jailed?

The furore around HSBC is huge; it's the biggest banking leak we've ever seen and covers 30,000 accounts holding £78 billion in the Swiss branch of HSBC, pulling in high profile names from across the political and business spectrum.

And while it's terrible it's not the most terrible thing the banks have done. After all, while tax avoidance may throw up moral issues, it is actually legal.

Thompson's husband Greg Wise is right to be outraged but why wasn't there this kind of commotion around the rigging of Libor rates, wholesale and incentivised mis-selling of PPI or the mother of all catastrophes, the financial crisis?

It's terrible that just one person out of 1,100 names on the HSBC tax dodgers list has been prosecuted, but no-one was for throwing the country into recession, using complex financial instruments and back scratching to make a load of money, or even for flogging rubbish insurance to normal people.

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Who's to blame?

Part of the problem is culpability. Individuals in banks are essentially protected by the herd as blame can't be brought to the feet of one person if a whole arm within a bank is doing something wrong.

While many would say the managers are the most culpable for letting poor practices sit at the heart of their teams, it cannot actually be proved that they knew about it and therefore we end up with fines and slapped wrists rather than prosecutions.

Changes made post-crisis that lay blame with appointed individuals are supposed to change the way banks and bankers pay for their wrong doing and incentivise them to do a decent job instead of fiddling the system but these new rules haven't been put to the test yet.

The fact that HM Revenue & Customs reportedly knew about these offshore shenanigans for five years and didn't act, and maybe wouldn't have acted until the story was leaked, shows that the cogs are slow to turn when high profile individuals are involved.

When you hear stories about pensioners facing jail time for refusing to pay council tax then the fact the bankers essentially get away with so much is even more galling. The fact that they are continuing to get away with so much means that Wise's call for action will resonate with many.

10 things your bank doesn't want you to know
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Why aren't bankers ever jailed?
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.

If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.


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