The country is facing one of its worst financial crises ever because of the Payment Protection Insurance (PPI) mis-selling scandal. Now, the Bank of England has issued another warning for UK citizens.
The PPI mis-selling scandal has been going on for over decades now. Most of the time, a PPI policy was mis-sold to consumers because banks and other lenders sought greater profit.
It was not at all fair, since consumers were mis-sold the PPI policy using various reasons such as, they were told that they necessarily had to take the policy, or sometimes the policy was sold to them without their consent.
Ever since the scandal came into light, people have been asking for reclaim from the banks, causing the banks to face numerous losses. If you wish to know if you were indeed mis-sold the PPI policy or not, you can make use of the free PPI check process that most claim management companies offer on their website.
The warning issued by the Bank of England states that the country might have to face further financial issues because of Brexit, and that it might further become difficult to regulate the country.
Sam Woods, the Deputy Governor, stated in one of his interviews that, “the Bank’s regulatory arm, the Prudential Regulation Authority, will face a material risk to its objectives”.
The objectives predominantly include promotion of the financial stability of the UK, ever since the UK decided to leave the European Union.
Mr. Woods further warned the people of the UK that because of the material extra burden on the Prudential Regulation Authority, it might have to ensure that they normalise more financial firms so that they can survive Brexit.
He even quoted in one interview that, “it is incumbent on us to manage this burden, but we may have to make some difficult prioritisation decisions in order to accommodate it.”
However, in a letter that Mr. Woods wrote to the Conservative MP and the new head of the Treasury select committee, Nicky Morgan, he defined that the possible consequences which the country might have to face because of the Brexit, is of the utmost priority for the Prudential Regulation Authority.
After various calls from the chancellor, Philip Hammond, who wanted a transitional exit deal, Mr. Woods further added, “Some form of implementation period is desirable in order to give UK and EU firms more time to make the necessary changes, to adjust to the UK’s new relationship with the EU in an orderly way.”
Mr. Woods even pointed out various risks that are included in the Bank’s half yearly assessment of attaining financial stability. The risks basically have warned the financial sector that the businesses conducted in the UK could scatter into bits and pieces across various other financial centres. This will eventually push up the costs to the EU and the UK.
Moreover, these risks are further a potential threat to the UK economy, which might lead to commotion in trade, and will need the banks to be well-prepared for greater debt charges.
Nicky Morgan had questioned Mr. Woods about how well the City is prepared for facing the worst consequences that might arise because of Brexit.
In reply, Mr. Woods said that the Prudential Regulation Authority is chalking out plans of 401 City firms that will help in ensuring that everyone is well prepared for Brexit.
The plan further recognised if there were any financial stability risks that could possibly arise from the collective execution of the plan.
However, Mr. Woods did not provide the media a detailed perspective of the individual plans. The firms are revealing how they aim to handle the finances since the UK’s exit from the EU. For example,
- RBS is preparing to expand its business in Amsterdam.
- Whereas, Barclays and Bank of America are moving their staff to Dublin and Morgan Stanley have chosen Frankfurt.
The Prudential Regulation Authority states that it was essential to ask the firms how they are aiming to handle the after-Brexit situation, so that there are no risks in the breakage of their financial services. These financial situations include the loans to other firms and people of the UK.
Woods further told Morgan, “the banks will however continue to develop and refine its assessment of the potential stability risks, associated with the withdrawal from the EU.”
He even stated that the collected information from these firms displayed that some of them might face issues while adjusting to the contracts and handling the aftermath of Brexit. Since these firms have their operations both, in the UK and the EU.
As Morgan published this letter, she quoted, “The UK leaving the European Union is a complex task. The potential extra burden on the PRA’s resources, and the risk that may pose to its objectives, is an issue I’m sure the committee will want to monitor.”
Nevertheless, the Bank might result in controlling various firms if they find there is no deal on passporting. This is the system because of which many insurance companies and banks that are based in the EU, Iceland, Liechtenstein, and Norway, can ensure their operations in the UK with authorisation from the Bank of England.
There are almost 70 firms in the banking sector that mostly operate on the above terms. Thus, it is these firms will need to obtain authorisation from the Prudential Regulation Authority, if they wish to continue doing their business in the UK.
The Prudential Regulation Authority is backed by the firms that it controls and has asked a total amount of £5.4m more to meet its annual requirements. They might need more money, for the country is about to face the after effects of Brexit.