Foreign Perspectives » Banking

How much track do you keep of your forex risk?

Arnold — Sat, 14 Aug 2010 12:38:11 +0000

If they’re honest, most people would say “not much” whether it be for their holiday spending or for their business dealings.

The practical reason for that in most cases is that Forex margin management is something that can be quite a complex subject to get your head around but these days currencies are moving around so much that it’s becoming essential for many businesses. Although in normal times exchange rates are fairly stable, we’ve not been in “normal times” for a while now and we’ve seen the British pound going from almost $2 to $1.40 over the last couple of years.

Such wide variations in exchange rates generally lead to wider foreign exchange margins too which means that it’s more important than ever to at least get the margin you’re charged down and try to get some control of the exchange rate itself through the various forex products available these days.

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Reducing card security through too much PIN usage

Arnold — Fri, 08 May 2009 09:33:21 +0000

One of the great things about the introduction of the chip & PIN technology was that it greatly increased security in the sense that you were no longer relying on the shop assistants comparing your signature against that on the back of the card.

If you’d been carrying the card around for a year or two chances are that the signature was barely visible but that rarely mattered anyway given the cursory glance of most shop assistants. Once the novelty value of the photo cards had dwindled it mattered little what photo was on the card although the current rarity of those cards does offer a measure of additional security to those who have them.

However, the problem is that your PIN is required EVERYWHERE. Fair enough when you’re buying something in a shop although it’s a little too easy to watch someone entering their PIN in a lot of locations and there’s a tendency for the person behind you in the queue to get so close that they can easily see your PIN. However, why the need to enter the PIN when you make a deposit in the post office? Not only are post office keypads more visible than most but why the need to identify yourself when making a deposit at all?
After all, the Halifax are able to take machine deposits without a PIN. Why can’t the post office?

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Exit the Halifax, enter Lloyds Bank accompanied by tighter lending and higher charges

Arnold — Thu, 05 Mar 2009 22:26:59 +0000

One of the problems in the recent round of bank takeovers is that the vast majority were shotgun weddings with little consideration being given to the fit between the banking cultures involved.

Already it would seem that the Halifax will be needing some exit signs for their current customers through a combination of tightening up of the lending criteria and raising of charges to the level typical of Lloyds. Both are understandable in different ways. The more lax lending at the Halifax was quite a contributing factor to its downfall and, of course, it would hardly be sustainable for overall charges in the Halifax to be lower than at Lloyds itself.

Still, it is sad to see the demise of the Halifax.

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Fraud checking goes real-time

Arnold — Sat, 07 Feb 2009 21:08:10 +0000

Whilst I’m sure that many have grown accustomed to having their card declined in recent months due to unannounced and often substantial credit limit reductions, the new HSBC fraud prevention software is sure to increase rejections still further.

As always, where you’re liable to find that your card is declined is when you’re making a transaction that/s outside your normal day to day habits. For example, if you use your card on holiday without telling the bank in advance then it’s much more likely that you will get your transactions rejected from the start rather than after a few days as would have happened previously. Similarly, if it’s a card that you save up for special occasions then you’ll find it rejected when you try to use it.

To avoid serious inconvenience for yourself, it’s best to travel around (at home and abroad) with a minimum of two cards issued by different banks. Worth noting is that some banks issue cards under many different flags so make sure that it really is a different bank that issues your backup card. Don’t forget that you should have a Visa branded and a Mastercard branded card for holiday purposes as not all countries accept both equally.

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Some good signs on the financial front

Getting a new credit card during the credit crunch

Arnold — Sat, 07 Feb 2009 20:47:08 +0000

With the global economy being in something of a mess as we are all too aware, it’s not quite so easy to pick up a new credit card to roll over that Christmas debt as many people have been doing quite habitually in recent years.

However, instant decision credit cards are available and thus it’s possible to find out fairly quickly whether or not you’ve a chance of rolling over your existing debt or just getting a new card at all. Although there are loads of sites that let you compare instant decision credit cards do bear in mind that the banks in general will reduce your credit score if you make a “lot” of credit applications in a “short period”. How many a “lot” is and how long a “short period” is varies between different banks but as a broad rule of thumb it’s probably best to limit yourself to no more than two or three in a month.

Also worth noting is the rise in credit card data sharing which is also affecting the credit decisions by banks and, usually, making it more difficult for a given person to get credit than it would have been a year ago in identical circumstances. Therefore, even if your credit rating is pretty much perfect, you should consider the “bad risk” cards which are easier to get normally and will usually give you a better deal if your rating is better than average.

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Some good signs on the financial front

Sending money cheaply and safely

Arnold — Tue, 13 Jan 2009 18:22:19 +0000

If you wanted to send a small amount of money to someone, for most people the simplest thing to do is to either pop a cheque in the post or simply to post the cash. If it’s a large chunk of cash then cheques and bank transfers are the way to go normally.

However, what if it’s a sum that lies in the middle ground and you want to send it internationally? For most people the answer isn’t nearly so cut and dried there. For instance, if you were sending EUR 200 from the UK to France or vice versa you’d be looking at around Â£25/EUR 20 in bank charges for the cheque or transfer and that’s before you factor in the tourist rate of exchange that you’d be getting.

If it’s a company you’re sending it to then you could use a credit/debit card of course, but that’s not really an option for an individual, is it? Well, actually these days it is as the person you’re sending it to could have a paypal account in which case, if they upgrade it to a premium account, then they could take the money off you at a cost of around 4%.

However, if it’s a family member a more practical way is to pop into the post office and pick up a travel money card and just post it to them. There’s no security risk as you can wait ’til it arrives before enabling the card. It costs around 4% to exchange the money from sterling to euros or dollars and it’ll be Â£5 or so two years later to renew it.

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So how bad might the economy be…?

Arnold — Mon, 08 Dec 2008 08:52:15 +0000

I came across a rather comprehensive take on how bad things are in the Spanish economy which makes for some interesting, if long, reading.

Spain is one of those places that hasn’t, yet, featured on the news in terms of problems with their banks which is surprising in some ways as it’s not a country that one would ordinarily consider as having strong banks. However, that’s misleading as the countries with the supposedly strong banks have nearly all run into trouble by now but largely because that strength enabled them to start operating on the international stage and thereby pick up problems that they’d not have gotten had they stuck to their domestic market.

Spain is different in that, for the most part, the banks seem to have acted to pull money into the country but that has created something of a problem since, as the article points out, it has created a climate where there’s been a little too much money knocking around. The problem in Spains case is that the developers have used that money to build far too many houses and now find themselves with a rapidly increasing stock of unsold houses.

The solution? Well, the developers would like more money to build even more houses but that glut of houses means that prices are falling rapidly in reality although that doesn’t show up in official statistics as those are based on estimates of the value of the houses rather than what they’re actually selling for. As elsewhere, the list prices of those houses bears little reality to the price at which they are really selling for and therefore it’s very difficult to get a clear picture of what’s really happening. Despite that, it appears that the fall of 50% or so the previous year will be followed by yet more falls to come.

That continued falling of prices spells trouble for the builders. In accounting terms, they’re presently holding them as trading stock but the falls are forcing them to reconsider them as assets for sale. That might satisfy the accountants but unperforming assets are no good to anyone and, of course, they can’t sell them. Nor can they reduce the prices by as much as normal people could because they’d then be into potentially serious losses.

In fact the solution seems to be to let a significant proportion of the developers go bankrupt and reduce building to more normal levels thus letting the stock of unsold homes find buyers. Not an easy solution but then if, as seems likely, we’re heading into a depression rather than a recession then no solution is going to be an easy one… last time around it took WW2 to get us out of it.

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Just how bad could a real recession actually get?

Arnold — Fri, 05 Dec 2008 08:12:07 +0000

When we talk of recessions, by and large the only ones that anyone really knows about are the puny little ones that we’ve been getting in recent decades.Â You know the type: house prices stop going up as fast as they’d been rising or perhaps fall a little bit, interest rates go down and like magic we’re back on track in a couple of years.

This one seems somewhat different. Interest rates haven’t just dropped a little bit, they’ve actually been yanked down right around the world. House prices haven’t really fallen much if you look at the estate agent windows but they’re not selling at the current prices ie they should be a lot lower than the advertised price (hence the mild panic in many estate agents re job security at the moment).

Banks are even being told to ease up on their customers in terms of interest rates and repossessions. Actually, that’s something that they probably don’t need to be told as they genuinely don’t want to be lumbered with a whole lot of houses that they can’t sell: much better that people pay what they can of the mortgage than that the bank takes over the house and then gets stuck with something that they need to pay taxes on and maintain while getting no income from it.

However, it will get worse if this becomes the first real recession since the 1930s. That would mean not only falling house prices but falling prices generally which in turn means widespread unemployment. Back in the 1930s they tackled that unemployment through massive public works programmes but things have moved on a ways since then and I can’t really see people accepting make-work digging up roads and the like.

Depressing, isn’t it? It’s actually worse because of the unwinding of the government loans/investments in the banks around the world which will need to happen at some point as that means higher taxes all round which obviously wouldn’t help what could be a very fragile economy when they kick in.

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What if you don’t want to pay online with your credit card?

Arnold — Fri, 31 Oct 2008 16:39:40 +0000

When you’reÂ online shoppingÂ it’s not really a good move to use a debit card and you certainly wouldn’t want to be bandying about your bank account details outside your own banks website. But what if you don’t have a credit card or don’t want to use one?

Up to now the options have been quite limited but that’s changing which is handy with the biggest holiday shoppingÂ event of the year (ie Christmas) just around the corner.

One of the latest entrants to this field is ebillme.com which shields your personal details a whole lot more than any other similar sites that I’ve seen. There’s a two step process to purchasing via them: 1) order something from one of their retailers (there’s a reasonable selection now and you can expect that to grow) and then 2) use your own banks bill payment facility to pay ebillme.com . Needing to log into two sites to buy something might sound a pain but it gives a major increase in the security to you.

To spread the word they’re even running a contest with some pretty respectable prizes. If you refer to the URL of this post I might even win something too

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Some good signs on the financial front

Can it get any worse in the banking world?

Arnold — Sun, 28 Sep 2008 16:08:06 +0000

Worryingly, the answer is probably “yes”.

In the last year the UK has had a series of high profile banks going bust (although they never used that phraseology). Just over a year ago the Northern Rock was taking around 20% of the entire UK mortgage market which is some doing for what was a fairly small building society not so long ago; not too many months later it was taken over by the government. Since then we’ve had Alliance & Leicester being bought by Santander, Halifax/Bank of Scotland being rescued by LloydsTSB (ironically one of the more logical takeovers given the history of both banks) and just this weekend Bradford & Bingley joins the Northern Rock in public ownership. That’s just the big players too as numerous smaller outfits have disappeared in the past year with the Nationwide alone sweeping up the Portman, Cheshire and Derbyshire and no doubt others have gone by the wayside with a less public profile.

Thus the business of obtaining mortgage quotesÂ is becoming both simpler and more complex. Simpler in the sense that there are fewer outlets around these days but more complex in that the criteria for granting a mortgage have become somewhat stricter: after all, when the banks themselves are going broke and tightening their belts they need to do the same to potential customers.

How could it possibly get worse though? Well, to date we’ve “only” had banks in the lower end of the top 5 or 10 going bankrupt thus it’s possible for LloydsTSB to sweep up the Halifax and JP Morgan to absorb a string of smaller banks in the past year. What would happen if some of those at the top end of the range went to the wall though? Who could take over the likes of Citibank or HSBC?

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