The Financial Services Authority (FSA) has given three high-street banks; Barclays, Lloyds Banking Group and Royal Bank of Scotland, more time to settle new PPI complaints in order to clear the backlog of PPI claims that were placed on hold pending the outcome of the Judicial Review.

Under the FSA guidelines, PPI complaints must be answered within 8 weeks. Howerver, the City Regulator has agreed to extent this to 16 weeks for the banks mentioned above.

The contract stated complaints that were frozen during the judicial review will be given a final decision by concluding August; while complaints raised after the High Court ruling on or prior to August 31 will be answered to in 16 weeks, and those that were launched on or following September 1 and earlier than December 31 will be answered during the 12-week period.

However the FSA stated the handling extensions depended on individual banks’ update on their complainants and keeping the FSA informed on their observance.

According to the FSA interim managing director, Margaret Cole, finishing the back pile of complaints was a subject of “urgency”.

She stated, “We want to see all PPI claims for compensation dealt with swiftly and appropriately.”  And stated “it is not in the interests of consumers to receive further poor handling of their complaints as a result.”

The FSA will be expecting all complaints to resume to its eight-week processing starting the first day of January next year, 2012.

Earlier today, Barclays PLC announced that it will compensate all it’s customers who complained they had been mis sold PPI before the 20th April 2011 on a “no questions asked” basis.

Barclays, who along with Lloyds Banking Group, Natwest and RBS had previously placed thousand’s of claims on hold pending the outcome of the Judicial Review into the handling of PPI complaints, are now facing a mountainous task of clearing the backlog they have created as well as having to deal with the deluge of new PPI compensation claims.

The FSA has granted Barclays, Lloyds and RBS special dispensation, in the form of an extended time period of 16 weeks, to deal with new PPI complaints to help them deal with the backlog of PPI claims that were previously “stayed”.

A spokesman for the Barclays is quoted as saying “Working in close co-operation with the FSA and the Financial Ombudsman Service, and in recognition of the delay customers have experienced whilst awaiting the outcome of the high court judgment, we can confirm that we are contacting customers whose complaint was put on hold on or before 20 April with an offer to settle their complaint in full as a gesture of goodwill.”

Royal Bank of Scotland boss, Stephen Hester, has confessed that a percentage of his staff’s bonuses may have come from taxpayer funds.

UK banks enjoy approximately £10bn of taxpayer funds per year, and Stephen Hestler enjoys a £7.7m wage deal. At the same time, his employees benefited a sum of £1m “take home” earnings plus £375m worth of prizes divided to key employees in 2010.

The administration’s “safety net” which maintains a build up of its large loan book, made it possible for the bank to acquire cheaper credit deals.

This “understood security” was lucrative business from which executives and banking employees get bigger incomes, the RBS head disclosed.

Hester stated, “The subsidy could have fed through to lots of places – the price of loans, the general economy, employment in banks and bonuses,” assuming a big possibility of “leakage to all the above.”

However Barclays head Bob Diamond denied of having benefited taxpayer subsidies and defended their business’ capital “was raised from money markets.”

Meanwhile Business Secretary Vince Cable notified the business, innovation and skills committee to have ordered evidence of executive wages coming from lending, as was agreed in the Project Merlin contract.

ICB chairman Sir John Vickers thought that UK banks could set aside a minimum of £10bn “disaster funding cost” per year, should taxpayer intervention happen again.

Vickers suggests on forcibly protecting all banks’ operations so their “casino” operations won’t affect loan borrowing and establish banks’ independence from tax payer subsidies.

However, his proposal aroused various standpoints on the pros and cons of ring-fencing.

HSBC’s chairman Douglas Flint expressed his concern that additional fortification should be needed to prevent 2008’s disastrous crash in lending and banking from reoccurring.

Arguably, Hester claimed ring-fencing banks would make them “protected beasts” that would brave investment risks, because of the state safety net. He also added it could also boost loan and mortgage value.

Lloyds Banking Group chief executive Antonio Horta-Osorio estimated a five- year recovery of the bank from its losses due to PPI compensation which it orchestrated last month.

The bank has set aside a £3.2 billion  PPI compensation package for its customers who were mis-sold payment protection insurance (PPI).

Horta-Osorio states, “This bank will be built over time – it is a three-to-five-year journey”.

Ireland’s economic decline has further pushed the bank to a first quarter 3.5 billion pound loss – a colossal task for the chief executive. But the Lloyds boss simply quoted, “It is fair to say some of the problems were more intense.”

The former Santander UK CEO stated that it is apparent “what the shape of the business will be in the future and how we expect to get there” since he had only been in the hot seat for three months. He said he will “not be setting out a full five-year plan.”

After bailing out on billions of taxpayer funds in the loan crisis, Lloyds was forced to sell a large sum of its assets in March as instructed by city regulators. The Independent Commission on Banking advised it to sell more in order to improve competition while European regulators thought 600 branches would be a good number to reach recovery.

A recent survey during April revealed experts and investors expect the Portuguese executive to sell off its Scottish Widows and St. James’ Place to help the balance sheet.

The British government is planning to put 41% of the bank’s stakes claimed during the bailout plus the part-nationalized Royal Bank of Scotland on the market, back to the private division.

Barclays is the first among high street banks to be put to a business model assessment (BMA) that will investigate individual sources of profit that comes in the company.

Lloyds Banking Group and investment banks Goldman Sachs will also be submitted to the test in the next few months.

BMAs were implemented by the Financial Services Authority to enforce a “forward-looking, judgment-based regulation” in due time for its makeover into the new Prudential Regulation Authority by the beginning of 2013.

The Experts’ job will be to ensure liquidity among firms, including the use of the Special Liquidity Scheme by the Bank of England.

Revenues and Funding will be under “stress tests” in order to build banks’ independence from subsidies.

Stress tests will examine the consequences of “structurally lower investment banking margins” and extended low interest rates on retail revenues.

The Financial Services Authority (FSA) chief executive Hector Sants supports the power given to city regulator to structure its own analysis of the “long-term profitability of investment banks,” thereby giving the authority to “challenge chief executives’ decisions and force them to modify their business plans”.

The City watchdog accomplished capital and liquidity stress tests on several banks and has formed aggregate models of productivity. It has built a meticulous analysis on potential business risks in everyday transactions.

He further stated, “This is about getting a third leg of the stool which is adding in the firm specific models. It’s about looking at a bank’s earning capability and the drivers of those earnings to alert us to increasing risks being taken and enabling us to have out own answers to the risks posed to that capability in the future and therefore a bank’s ability to grow its’ capital base”

The FSA has already started a “sector-wide” model for funding for UK banks to asses their reliance on different liquidity sources, like the Bank of England’s Special Liquidity Scheme as well as the “covered bond market and retail deposits” of which value to their corresponding financial institution are currently assessed.

The banks are under close scrutiny in the wake of the mis sold PPI scandal.  If you would like to know more about Payment Protection Insurance and whether you may be entitled to PPI compensation, call Bank Charges now on 0800 8407291.

Due to discontentment, thousands of unsatisfied customers are transferring their accounts from high street banks Royal Bank of Scotland, Barclays, HSBC, Lloyds, and Santander to their smaller competitors who claim to offer alternative services.

Among these small banks are: Handelsbanken, a bank that received outstanding reviews primarily because they do not sell financial products like the PPI, nor utilize incentive bonuses to sell them; Nationwide Building Society, which reported 353,000 new accounts opened; and Metro Bank, who claims to have “no stupid bank rules”, has opened six branches in London and is setting eyes on expanding to Birmingham or Manchester.

According to a recent study headed by Accenture, the percentage of high-street customers who would recommend their banking institution to loved ones and friends dropped from 64% to 58%.

Additionally, Customer satisfaction also plummeted from 84% in 2007 to 73% in 2011, due to unsatisfactory complaint handling.

Lloyds Banking Group and Santander received disapproval by the Financial Services Authority for poor PPI complaint handling as well as BOS who was recently fined ₤3.5m on top of another ₤17m for its mis sold investment products.

In a survey in May by Moneywise, Santander ranked the worst complaint handler, with reviews of bad service of going up to 40%, followed by Barclays with 11% and Halifax receiving little over 9%.

Accenture senior executive explains, that the declining trust in high street banks have influenced consumer behavior to transfer to newcomer banks who benefit greatly from the switch.