Idea: don't tax deposits or transactions, tax risk

While the Obama proposals to limit banking activities and the resulting restructuring of the banking industry are great news for management consultants and IT specialists like me, I can't help feeling that there's a simpler way to crack this one. Ideas like a Tobin tax, locally or internationally, could mess up trade and financial flows.

Levies based on the size of an institution's deposits, such as the HM Treasury's UK Deposit Protection Scheme, are plainly unfair. This scheme penalises the good rather than deterring the bad. Building societies and retail-focused banks have a large depositor base - and funding operations with a large depositor base is a lower risk affair than relying on wholesale funding as Northern Rock did. Building societies lend against physical assets which in theory should represent properly-valued collateral, which is a whole lot less risky than risking your capital in financial operations.

Banks have spent billions over the last five or six years on technology to calculate and assess risk. It's called Basel II. It has holes that the scruffier end of the market could climb through, but so does any set of rules. Despite that, some banks are really quite good at assessing risk, others less so.

Instead of taxing deposits or transactions, we should tax risk. This can be done at different rates depending on the type and the term of the risk, it would be priced into transactions and deter the sillier types of trade, and it would give a huge incentive both to the institutions and to the tax men to assess the risks properly to avoid underpaid or overpaid tax.

That's my opinion. Comment welcome.

Affordability checks for UK mortgage lenders - not so new

The UK Government and the FSA are making a great play of their plans to introduce affordability checks for mortgage borrowers. The FSA's reform proposals are here.

This really should be nothing new for the banks, which already have responsibilities under the FSA's Treating Customers Fairly initiative. The FSA Treating Customers Fairly pages include six consumer outcomes, including:

Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.

Drilling down further into the examples, these include a specific example of the need for the mortgage sales process to check affordability.

Affordability will often have been an issue in some types of loan, but these - self-certification, sub-prime and high Loan To Value mortgages - have pretty much disappeared from the market.

Best practice sales processes for lending already include the checks, but of course these are only as good as the information available to them, and some may be circumvented by inaccurate statements or disclosure by potential borrowers. If the proposals include harsh penalties for selling unaffordable loans, lenders will have a problem. Inevitably though, they will find ways to manage and mitigate the risks, even if that means a reduction in the availability of loans.

More later when I've gone through the 118-page FSA document.

Unsolicited calls

Two unsolicited calls today on my home phone, which is registered with the Telephone Preference Service (TPS). One caller identifies himself as working for 'various financial companies', the other for 'different financial companies'. They pronounce the 'various' and the 'different' very indistinctly to try and cover up the fact that they haven't introduced themselves properly. They want to make an offer regarding mortgage interest rates. Both are using a very low quality connection and refuse to state who they represent. They won't say who asked or told them to call me.

A UK regulated financial services company should not be making unsolicited outbound calls. It knows that this carries penalties, and increasingly will ask customers to sign up to receive a regular call from an adviser or an account manager. Product design may include a provision for calls from time to time. So a company may sometimes make a mistake, but it will try hard to avoid repeating it. If you don't want to be bothered, just tell them clearly that you don't want to hear from them again.

An unregulated company based abroad has few constraints apart from penalties that may arise if any misuse of the telephone system is proven. The best thing to do is to tell these people to get lost - and don't call again.

TPS advice is as follows

Companies based abroad who call into the UK and who are making calls on behalf of a UK based company, must comply with UK regulations and screen their call lists against TPS before making an unsolicited sales and marketing call to a UK telephone number. We do make the file available to overseas based companies under licence for the purpose of suppression so they know whom not to telephone but many overseas companies who telephone the UK on their own account from overseas do so to avoid legal and self regulatory restrictions. We would advise caution in responding to unsolicited sales and marketing telephone calls from overseas especially if they are asking you to send them money or using a premium rate phone line (numbers beginning with 09). If you are receiving unsolicited sales and marketing calls from overseas you should contact the overseas company who is making the call.

Just ask - which company's products are you selling? If there's no straight answer, it's either a scam or a very stupid sales approach. In either case, you really want nothing to do with them.

Report phishing attempts

Fed up with phishermen? If you're a customer of a UK bank, and assuming you spotted the bogus e-mail before you clicked a link and compromised your bank accounts, there's a way to fight back. Give the banks the information they need to close the scams down! Some banks use an umbrella method such as BSO, others have their own arrangements. In either case, the sooner they hear from the public, the sooner action can be taken. The list below shows reporting contacts for fraudulent e-mail attempts.

BankSafe Online (operated by APACS*):	reports@banksafeonline.org.uk
Anti-Phishing Working Group (APWG):	reportphishing@antiphishing.org
A&L	frauddepartment@alliance-leicester.co.uk
Barclays:	internetsecurity@barclays.co.uk
Halifax Bank/HBOS:	onlineemailinvestigations@hbosplc.com with the subject 'Report'
HSBC:	Gives links to APWG and BSO
Lloyds TSB:	EmailScams@lloydstsb.co.uk
Nationwide Building Society:	phishing@nationwide.co.uk
NatWest:	nwolb@natwest.com
Royal Bank of Scotland:	digitalbanking@rbs.co.uk
Abbey National:	E-Banking helpdesk on 0845 600 4388, open 7am-11pm, seven days a week
Clydesdale Bank:	links to APWG
Yorkshire Bank:	links to APWG
Northern Bank:	links to APWG

Forwarding your suspect email

Select the suspect email (don't double click to open it), right click and select the Forward action, and send it to the appropriate email address

Attaching the suspect email to a new email

Create a new email in your PC or Mac based email software, and drag and drop the suspect email from your inbox into the body section of the new email. Please note that this method will not work for web based email services e.g. Hotmail, Yahoo! Mail etc.

*APACS is the UK trade association for payments and for those institutions that deliver payment services to customers.