Latest Financial News

Despite a flurry of activity in the financial world recently, the biggest news in the UK undoubtedly is the release of the Independent Commission for Banking`s report. Hailed as having the possibility to completely overhaul the banking system, the report was much awaited by the industry and consumers alike.

The report has disappointed some by not being as radical as hoped but it has made a plethora of suggestions to reshape the structure of Britain`s banks and also to provide a greater level of protection to account holders. One of the key recommendations centred around the way in which account switching is handled by the banks, with the current process described as time-consuming and overly complex and often taking up to a month to fully complete. The ICB report has recommended that the process is simplified and takes no longer than 7 days to complete, with the opportunity for consumers to retain the same account number if they so wish. This would prevent payments or transactions linked to the old account number from going completely astray.

The commission also had a number of proposals directed at the way in which the industry is set up, not all of which were greeted with popularity by bankers. Lloyds has been told it must sell off more of its branches in order to increase the competition in the market and drive more choice for consumers. The recommendation follows the widely criticised purchase of HBOS which gave Lloyds a stranglehold on the market. Needless to say, bigwigs at Lloyds were unimpressed by the suggestion and are waiting to see if they will be forced to implement it. The report also said that the investment arms of banks should be kept separate from the retail operation, to protect consumers` money from any risky transactions the bank chooses to engage in.

In separate banking news, the government appears to be reconsidering its plans to abolish cheques by 2018, a policy which has been greeted with more or less universal condemnation. With vulnerable groups unable to get to grips with technology, small businesses and charities all dependent on their cheque-books, no viable alternative had been put into place to address the issues faced. The Treasury has now confirmed it will be considering all options and that `people will not be forced into shredding their cheque books`. However, despite the flood of public appeals, the banking industry confirmed the use of cheques has plunged by 40% in the last five years, with the industry saying the abolition of cheques should go ahead as planned but a paper-based alternative needed to be found for those that required it.

The banks have long been criticised for their extortionate charges, but with consumers given no option, many have paid over the odds for services provided. Until now. The bureau de change specialist, Travelex, is launching a new money transfer system which offers consumers the facility to send money anywhere in the world for just a 99p charge, less than in would cost to post a cheque overseas. The same service offered by banks at present typically costs between £20-25, a cost which Travelex are saying is unnecessarily high and penalises the customer for sending money securely. Under the Send Money Now system Travelex are introducing, the funds are guaranteed to arrive at the destination within 5 days, but customers who want to send money in an emergency can pay £7 and Travelex guarantees arrival within 48 hours. The service is available for any sum of money between £25 and £2500 with no restrictions on usage.

Many of the other services banks have charged over the odds for in the past include the much-discussed Payment Protection Insurance (PPI). Thousands of customers were judged to have been mis-sold PPI by the banks, with complaints upheld by the Financial Ombudsman Service after being rejected by the banks. However, the banks refused to accept the ruling by the Ombudsman and challenged their decision in the courts. The case has now been heard with the courts issuing their rules in favour of the consumers, ordering the bankers to pay the claims, thought to be in the region of a whopping £3 billion if every mis-sold case claims for compensation. Possibly due to the potential amount of money involved, the bankers have said they will consider whether to appeal against the decision, leaving customers waiting for their refunds hanging on even longer.

In overseas news, the US has been slapped with a warning by top credit agency Standard & Poor over their continued budget deficit which shows no signs of reducing. Despite the country being allowed to keep its top-notch triple A credit rating for the time being, S&P warned that there is a one in three chance of the US being downgraded in the next two years. Such a move would be disastrous for the US` economy, as downgrades in credit means the cost of borrow rises, counter-productive to a country trying to rebuild its fragile finances and encourage growth.

However, the US is not the only country to have been issued with a caution, Iceland is another which has been told it needs to sort its finances out or else face a downgrade. The country is still struggling to find an acceptable way to repay the debts it owes to the UK and Holland following the collapse of the Landsbanki group. As Dutch and British investors lost their money, the respective governments handed them their money back and are still waiting for Iceland to refund them, several years on. The Icelandic public voted in a referendum to reject the latest proposals put forward by the government, leaving ministers scratching around for ideas. Landsbanki assets are estimated to be worth around £1.3 billion, but with debts excluding any interest of £2.3 billion the Icelandic government has substantial funds to find. Iceland is known to be desperate to be let into the European Union but if it fails to pay its debt, it faces a downgrade in its credit status and also the blocking of its application by the UK and the Netherlands, both of whom have said they will start legal proceedings if a repayment schedule is not forthcoming shortly.

The woes of the single currency are not yet over, despite the rescue package for Portugal, agreed to prevent contagion to other countries with fragile economies. Although the move has been seen as a success and indeed many sighed in relief when Portugal finally capitulated and requested the hand-out, Greece is now back under the spotlight, despite already being bailed out. The country is still in dire financial crisis, with cases of nationals attacking migrants in battles over scant jobs, with foreigners being blamed for taking valuable employment.

The volatility in the Greek economy is continuing to make its mark on the euro and despite recent strength, the single currency is fluctuating with support levels being breached as the market saw the biggest daily drops in five months.

However the US dollar also continued to struggle in the forex markets with the country`s credit warning weighing heavily on the currency. In a basket of currencies, the US dollar was lower, with a drop of 0.6% and touching three years lows at times. The dollar was also weak against the yen, falling to 82.41 yen.The Canadian dollar outperformed both the euro and the US dollar, with the currency firming. However, with inflation reaching a 30 month high, the central bank is under increasing pressure to drive up the interest rate to control an overheating economy.

Sterling was on the up as the March retail sales data showed a rise, but the currency remains vulnerable as the market awaits confirmation of the gross domestic data due out at the end of April. With a shrinkage in the last quarter`s results, a further contracture in GDP would cause real problems for the economy, sending sterling tumbling.

With many currencies across the globe showing significant levels of volatility, many dealers are trading the dips and by keeping on top of forex news, following the movement of the markets. However, there are several key pieces of data due to be released over the next few weeks which could send the currencies swooping one way or another. Other factors which will influence trends include whether the Bank of England opt to increase interest rates in May and whether the US government are able to find a solution to their debt deficit.