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EU Commission Fines Rate-Rigging Banks

EU Commission Fines Rate-Rigging Banks

EU Commission shocked that competing banks were in collusion

The European Commission has fined eight banks – including RBS – a total of £1.4 Billion (GBP) for forming illegal cartels to rig interest rates. The cartels operated in markets for financial derivatives, which are products used to manage the risk of interest rate movements.

A number of banks were engaged in the rigging of interest rate products intended to reflect the cost of interbank lending in euros, while another group fixed prices for products based on the Japanese yen.

The rates are used to set the price of Trillions of dollars (USD) of products, including mortgages.

Some were involved in both markets and more than one cartel, including RBS, which was fined a total of £325 Million (GBP). The fines are the first ever penalties for interest-rate rigging by the EU.

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Mortgage Lenders Worried Help-To-Buy Will Distort UK Property Market

Mortgage Lenders Worried Help-To-Buy Will Distort UK Property Market

Help-To-Buy Controversy Continues

The latest figures released by the popular property finding portal, Rightmove.co.uk coincide with the news that UK based mortgage lenders are worried that the second phase of the Government’s Help-To-Buy scheme risks distorting the true health of the UK property market.

The British Bankers Association (BBA) is a governing body that represents all the banks that are currently participating in the scheme including those who are planning to participate in it in the future, has called for Government clarification on the proposed exit strategy from the Help-To-Buy scheme, according to a report in the Daily Telegraph.The news comes just 2 weeks before the Chancellor of the Exchequer, George Osborne’s Autumn Statement on 5th December.

In a submission to HM Treasury, the BBA said, “Some members of the BBA are participating in the Government’s Help-To-Buy scheme, but further clarification is needed on exit strategies.”

Mortgage applications worth £365 Million (GBP) have been received since the second phase of the Help-To-Buy scheme was launched on 1st October 2013, to help aspiring home buyers get a foot on the property ladder.

The Royal Bank of Scotland, NatWest, Halifax and Bank of Scotland started offering residential mortgages under the umbrella of the Help-To-Buy scheme last month and mortgage lenders representing most of the UK mortgage market have confirmed they will eventually come on board, in order to capture a share of the market.

The Government initiative makes it easier for mainstream mortgage lenders to offer higher value mortgages with deposits as low as 5% by removing some of the risk they would face if the borrower defaults on repayments, because the mortgage products are underwritten by the Government as Spotlight has previously reported.

The Government are very happy to be underwriting Help-To-Buy mortgages because they are listed as a second charge on the mortgage, increasing the Governments property assets, allowing them to borrow money against their portion of the residential properties purchased under the Help-To-Buy scheme.

At least property investors enter the property market with an exit strategy in mind, but the Government have yet to reveal how they intend to exit from the property market when the scheme ends. No wonder mortgage companies are worried!

UK Funding For Lending Scheme Flops

UK Funding For Lending Scheme Flops

The UK Government initiative to get banks lending again has become a bit of a laughing stock according to some economists.

The funding for lending scheme (FLS) was dubbed a “white elephant” after the first data showed that in the three months to the end of September 2012, just £500 Million (GBP) of lending was released by all the 35 banks and lenders signed up for the scheme, which was launched in August this year.

The funding for lending scheme was supposed to reduce borrowing costs for banks and other lenders, who are required to pass on the lower costs to their customers. But so far the lending appears to be lowering mortgage rates rather than helping small businesses.

Only six banks and building societies have used any funds from the FLS in the three months to the end of September 2012 and their net lending – which takes account of loans being repaid – was negative by £1 Billion (GBP) because customers repaid existing loans faster than new loans were granted.

At three banks, more loans were repaid than new loans actually taken out, leading to negative net lending at Royal Bank of Scotland of £642 Million (GBP) and Lloyds Banking Group took £2.7 Billion (GBP) from the economy during the third quarter while Santander removed £3.4 Billion (GBP).

The biggest injection of credit came from Barclays at £3.8 Billion (GBP), whilst Leeds Building Society added £212 Million (GBP) and Nationwide Building Society £1.8 Billion (GBP).

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