News & Insights

Is another Banking crisis just waiting to happen?

A study by the Adam Smith Institute (ASI) said the Bank’s tests – designed to measure whether a bank could withstand a severe financial shock – give false comfort by overstating the resilience of the finance sector.

“It is disturbing that 10 years on from Northern Rock, the best measure of leverage – those based on market values – indicate that UK banks are even more leveraged than they were then.

“The biggest risk facing the UK banking system now is the Bank of England’s own complacency.”

The report said high bank leverage had helped fan the flames of the financial crisis, while market valuations of UK lenders indicate that some have hidden losses.

And for those thinking, “I’m OK, I don’t have my money in UK Banks.” Do you believe that the banks in Europe are any better? Just look at the current state of Italian banks. And then there’s the recent collapse of Banco Popular, the 6th largest bank in Spain, which only last year passed the stress tests with flying colours.

The collapse of Northern Rock didn’t just highlight the fragile state of the banking sector across the world, it has caused repercussions still being felt 10 years on; pensioners and savers are still suffering due to low interest rates, which have meant that in real terms they are losing money year on year as they are unable to keep up with growing levels of inflation.

In September 2007, a £40,000 savings pot would have earned a couple annual interest of £2,679, when the best rate on an easy access savings account was 6.5%, from West Bromwich Building Society. This compares to today’s best-buy rate of just 1.25% from Ulster Bank. This would generate a paltry £503 over 12 months — or £2,176 less.

Today, the only real alternative that can possibly offer the potential to outperform inflation is investing your money.

Other News

Italy introduces new tax break for wealthy expats

Leaning Tower of PisaItaly has introduced a new ‘non-dom’ tax incentive which may see many wealthy British expats relocating to its shores, as well as convincing rich Italian expats to return. The new measure was approved by the Italian parliament in December as part of Italy’s Finance Bill 2017.

It ensures that foreign residents will be exempt from Italian tax on all offshore income and gains for a flat-rate tax charge of €100,000 (about £84,000). For a further €25,000, the tax exemption can be extended to family members.

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Do you have a Final Salary (Defined Benefit) UK pension scheme?

Is your final salary scheme safe?  Are you aware that many of these schemes are seriously underfunded? What is the exact deficit of your final salary scheme? Brexit and the BHS scandal have brought the pension deficit story in to the media spotlight again. However, the issues with defined benefit schemes have been brewing for some time. The UK faces a very real pension crisis with several schemes close to collapse unless serious steps are taken to address the growing problem.

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