The current state of affairs shows that even the biggest banks with good reputation can fail in realization of their objectives. Thus, the Germany’s biggest bank, Deutsche Bank, has been fined by the court for more than seven hundred thousand US dollars. The reason for this is the failure to give proper advice to middle-size client on the real risk of a complex swap transaction.

The conflict started from the side on Ille company, the client of Deutsche Bank. Ille’s business deal embraced a bet on the difference between two-year and ten-year interest rates. Deutsche Bank’s fixed-rate pays to the company were netted against Ille’s pays to the bank, which were grounded on the interest rate difference, spiced by a coefficient.

The court claimed that Deutsche Bank’s warnings to Ille company were insufficient and could provoke the risk of loss. The court also stated that there was a conflict of interests, as long as Deutsche Bank was both giving advice to the client but actually, betting against it.

The bank should have informed the client how much the deal was worth to Deutsche from the first day. In Ille’s case it was around 4 percent of the contract’s interest rate swap. A solicitor for Deutsche Bank warned earlier this year that disclosing such revenue could provoke a second fiscal crisis. The judges obviously were not persuaded.

Personal finance is a point of interest for nearly each individual, basically when it comes about saving cash. One may suppose that keeping cash at home is safe, however events reveal many risks attached to the very method of saving finances. A number of persons just are not able to live in one location with their ‘treasure’: they’ll always be allured to spend it in everyday life. (continue reading…)

Offshore banking is a quite popular business nowadays and ever more people are involved in it. Offshore banking provides a method to overcome the limitations on currency movement both for individuals and organizations. Usually offshore banks are situated in places that propose fiscal and legal advantages. There’s less confinement in legal injunctions and low or at all no taxation in such locations.

In spite of the privileges ascribed to such banks, there exists implicit disbenefit as well. As a matter of fact, some offshore banks stipulate greater interest rates than the home banks due to their lower expenditure base. The regulation isn’t developed to protect the holders’ accounts from frauds or money laundering. Thus, a holder cannot be assured that his savings are in total safety.

To continue, the returns on certain offshore banking accounts might be substantially lower than common bank accounts. That is why the advantages of offshore banking appear at a high cost. The other offshore banks prescribe fees and minimum deposits necessary to open and manage accounts. Hereby, it makes them difficult of access to the community. (continue reading…)

Worldwide economic crisis left an unpleasant imprint of banking system. Banks and individual financial institutions tried to outlive the recession providing new policies in servicing and customer area. Today many EU countries provide austerity plans for the mass fields of human activity. UK government is not an exception: it introduces changes to the banking system which are opposed by banks.

The changes touch upon bonuses which will be limited from 1 January, 2011. Top UK bank bosses are going to meet with the Business Secretary to discuss this controversial issue. According to new governmental introductions, the banks commitments as for the lending to SME must be increased. In its turn, the government will set a limit to bonuses and won’t bow to the wishes of banks. Top banks threaten to leave UK in case the following limitations are set into force. However, the UK government assures that stricter regulations are necessary to provide in order to avoid default in banking system.

Public opinion has divided on those who back the changes and those who support banks. For many people bonuses are the main reasons for financial crises. Supporters in the form of British Bankers’ Association believe that the above mentioned changes will put British banks to higher disadvantage comparing to rivals outside Europe.

Irrespective of the opposition, the British government is certain that limitation of bonuses and increase of lending to SEM will be a success and help the banks to outlive all instable situations.